Asian Session Forex Recap – Mar. 15, 2016

  • RBA meeting minutes: low inflation provides scope for “further easing.”
  • BOJ keeps current policies steady in March
  • Japan’s industrial production remains at 3.7%
  • Japan’s capacity utilization up by 2.6% vs. 1.0% decline in December
  • Japan’s tertiary industry activity up by 1.5% vs. 0.4% expected, -0.6% previous

Risk aversion was the name of the game during the Asian session, as central bank events and weaknesses in commodity prices inspired caution among forex traders.

Major Events:

RBA’s meeting minutes – In a more detailed report, the Reserve Bank of Australia (RBA) revealed its optimism for the economy. Aside from improvements in the employment sector, the central bank also highlighted that the economy continued growing at a moderate pace despite the drag on the mining sector.

What caught the market players’ attention was the RBA reminding us that Australia’s continued low inflation leaves scope for further easing. Remember that though the RBA has kept its rates at its record lows since May last year, it has been threatening to implement rate cuts should demand call for it. Not surprisingly, the Aussie lost a couple of pips against its counterparts.

BOJ’s policy decision – The biggest story of the hour was the Bank of Japan (BOJ’s) decision to keep its current monetary policies intact. More specifically, analysts noted the central bank’s removal of its threats to drag interest rates further into negative territory if needed.

Recall that just last month the BOJ implemented negative interest rates for the first time in history. The lack of follow through put a dent on the BOJ’s rep and soured the investors’ appetite for higher-yielding assets. It also served as a red cape for the yen bulls, who aren’t expecting any more easing from the BOJ anytime soon.

Slide in commodity prices – The salt on the wounds of risk-takers was the decline in prices of commodities like gold and oil. Spot gold fell to its lowest in two weeks on the back of Greenback strength, while Brent crude oil also dipped by 1.21% thanks to OPEC’s forecasts from yesterday.

Cautiousness ahead of the Fed’s decision – Another reason for the lack of risk-taking is cautiousness ahead of the Fed’s policy decision and press conference. As Forex Gump stated in his latest post, market players are closely watching the Fed for any hints on its interest rate hike schedule. Any delays could drag the Greenback across the board, while a hawkish release could boost the dollar higher.

Major Currency Movers:

JPY – The low-yielding yen has the BOJ’s lack of further action to thank for its recent strength.

USD/JPY ended the session 52 pips lower (-0.46%) while EUR/JPY dropped by 46 pips (-0.36%), GBP/JPY fell by 99 pips (-0.61%), and AUD/JPY slid by 59 pips (-0.69%).

Comdolls – Commodity-related currencies received a double whammy of lower commodity prices and overall risk aversion in the markets.

AUD/USD inched 19 pips lower (-0.25%), USD/CAD rose by 30 pips (+0.23%), while the Kiwi also declined a couple of pips against its counterparts.

Watch Out For:

  • 7:45 am GMT: France’s CPI expected to stay at 0.2%
  • 10:00 am GMT: Euro Zone’s quarterly employment change (0.2% expected vs. 0.3% previous)

See more:

U.S. Session Forex Recap

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