The yen continued its relentless slide, as dollar / yen took over 118 yen handle and euro / yen topped the 149 level; a respective 7-year and 6-year high. It appears that traders are dumping their yen exposure before the elections, which Prime Minister Abe is expected to win. Not even a better-than-expected Japanese trade balance for October was enough to convince traders to stop selling the yen. Exports grew much faster-than-expected in October, probably helped by the weaker yen. 120 in dollar / yen was increasingly cited as the next target.
In other news, Chinese HSBC Manufacturing PMI for November dipped to 50 from 50.4 the previous month, hitting a 6-month low. The Australian dollar, which often follows Chinese economic developments, was under pressure as it dipped below 86 cents to 0.8577. Falling iron ore prices; a key export commodity for Australia, also helped push the aussie lower.
During the previous day’s US session, the Fed minutes revealed a slightly more dovish tone than what was reflected in the policy statement. Some members were worried about the possibility of deflation and wanted to keep a close eye on inflation expectations. A potential global economic slowdown was also noted albeit the committee felt it would have a minor impact on the US for now. A debate inside the committee was whether to signal the pace at which interest rates would rise so as not to cause concerns that the Fed would tighten too much too soon. Euro / dollar was not much moved by the minutes and was last trading at 1.2525.
The remainder of the day will be quite busy in terms of incoming data. The flash (or preliminary) November PMI business confidence surveys from Markit about the Eurozone will be closely watched for signs that the region’s economy is not slowing down during the final quarter of 2014. Then, UK retail sales for October will give an update on the state of the UK consumer, followed by US inflation for October around the start of New York trading.