The dollar pushed higher against the yen, making new 7-year highs around 117.40 (the previous high was 117.06) on follow-through selling after the Japanese Prime Minister’s decision to delay the sales tax hike and call early elections. In its decision today, the Bank of Japan decided to refrain from any additional easing, having already extended its monetary stimulus on October 31.
For the Japanese currency and the whole affair with the early elections and the delayed tax hike, the old adage of ‘buy the rumor, sell the fact’ does not seem to apply. Yen selling apparently took place during the rumor as well as after the fact. Such is the bearish sentiment against the yen right now that no profit-taking took place after Abe’s announcement.
It was not all good news about the Japanese economy however, as a representative of Fitch sovereign ratings said that the rating agency was evaluating the impact of the decision to delay the tax hike – calling it a significant development. The agency rates Japan as A+ with a negative outlook – not exactly a high credit rating compared to other developed countries despite what record-low Japanese bond yields would suggest.
The New Zealand dollar was the session’s biggest loser after a dairy product auction showed lower prices. The kiwi traded as low as 78.60 cents (US) before rebounding to the 78.80 level. It was trading at 79.23 at the close of US business.
Looking on to the rest of trading day, the release of the Federal Reserve minutes late in the US session will probably be the day’s key forex event, as the Fed is now trying to crystallize its strategy and communication policy in the post-QE environment. The vote count from the Bank of England will also be looked at earlier in the day, as will US building permits near the start of the US trading session.