There was some profit-taking versus from US dollar longs, following impressive gains the previous few sessions, pushing dollar / yen temporarily below 123 and euro / dollar above 1.09.
Traders covered some of their euro shorts as both Greece and its creditors sought to play down fears that a Greek default was looming. The country might not be able to make an IMF debt payment due next week. It was overall difficult to get a complete picture of the state of the negotiations between Greece and its creditors as contradicting statements have been made by Greek and EU officials. Nevertheless, as more repayment deadlines draw near and as cash in Greece is running out, the incentives for a deal grow larger and some sort of agreed resolution is expected – which would most probably keep the country afloat in the short-term but not resolve the uncertainty in the medium-term. The euro was trading at 1.0915 against the dollar and at 134.17 against the yen.
Dollar / yen made a fresh 8-year high at 123.32, after a break of the 122.04 year-to-date high led to the triggering of stop losses that catapulted the pair higher. The yen managed to push back a little and drove the dollar below 123 at 122.90 as minutes from the latest Bank of Japan meeting showed little change in the bank’s outlook and that policy was looking to be steady for now. The falling yen helped the Nikkei buck the international trend of lower stock prices as it managed to close up.
The previous day on Wall Street, stocks dropped and the dollar rallied after an array of economic news reinforced the view that the Fed would be justified to hike interest rates this year. Particularly positive were business capital equipment orders excluding defense and air transportation, as well as New home sales. Consumer confidence dropped but managed to beat expectations. Some regional business sentiment surveys were also upbeat. Treasury yields did not rise on the upbeat data however – perhaps on flight-to-safety trades due to the drop in the stock market.
On today’s calendar, following the releases of German and French consumer confidence, the Bank of Canada will announce its rate decision and that will be followed by the Dallas Fed Services sector index. Overall not much action is expected from today’s scheduled releases and events.