FX Roundup: Yen surges against major crosses

The yen surged against major crosses on Tuesday, despite Bank of Japan governor Haruhiko Kuroda saying he is 'monitoring the currency.'

At 1715 BST, the dollar and the euro were 0.93% and 0.92% lower versus the yen, changing hands at JPY110.31 and JPY125.6400 respectively.

Kit Juckes, head of forex at Societe Generale, said, “The yen is still following the Nikkei faithfully and illogically, for those of us who think the equity market is supposed to follow the currency rather than the other way round.

“Kuroda is not ruling out further monetary easing, but the forex market doesn't care. We'll stick with SEK/JPY longs as our preferred way of being short yen. This cross is still well above February lows, but it's not going to plan (yet).”

Continuing with Asia, the Reserve Bank of India cut its repo rate by 25 basis points to 6.5% on Tuesday, which was within market expectations. However, its reverse repo was raised by 25 basis points to 6%; a move which surprised the market. At the close of trading in Mumbai, the dollar was 0.39% higher versus the Indian rupee, fetching INR66.4625.

Earlier, Reserve Bank of Australia made a call on rates on rates as well, keeping the country’s official cash rate steady at 2%, which was also widely expected. However, volatile oil prices suppressed any gains from the decision, with the Australian dollar shedding 1.03% versus its US counterpart to change hands at US$0.7527.

It reflected a wider dip in commodity linked currencies as the New Zealand dollar also shed 0.70% versus the greenback to change hands at $0.6786. Additionally, the greenback rose across the board in the Americas gaining 0.73% versus the Canadian dollar to change hands CAD$1.3180.

A plethora of other regional commodity currencies headed lower with the dollar rising 1.60%, 0.69%, 0.76% and 1.53% against the Mexican, Colombian and Chilean pesos and the Brazilian real.

Finally, the pound saw a less than sterling session after UK services sector growth accelerated in March but remained subdued, according to a survey by Markit/CIPS.

The purchasing managers’ index rose to 53.7 last month from 52.7 in February, beating forecasts of 53.4 and remaining above the 50 level that separates an expansion from a contraction. However, Markit said the improvement was “insufficient to prevent the data from indicating a slowdown in economic growth in the first quarter”.

The sentiment weighed on the British currency which spent much of the European session in negative territory. At the close of trading in London, the pound was down 0.76% versus the greenback, changing hands at $1.4156.

“At 53.7, the weighted average output index from the three surveys was up from 52.9 in February, when the index sank to the greatest extent for four-and-a-half years,” said Chris Williamson, chief economist at Markit.

“The resulting first quarter average PMI reading is consequently the lowest since the second quarter of 2013.”