Yen Extends Rise Amid Risk Aversion

The Japanese yen extended advance against its major rivals in European deals on Tuesday, as concerns over higher interest rates in the U.S. and deadlock in Greek debt talks, as well as downbeat Chinese inflation data spurred demand for safe-haven assets.

Speaking after the G7 summit in Germany, German Chancellor Angela Merkel has warned Greece that time is running out for a reform-for-aid deal to keep the country in the euro zone. «There isn’t much time left» and «every day counts» to complete the necessary work, she added.

Data released by the National Bureau of Statistics on Monday showed that China’s consumer price inflation rose 1.2 percent year-over-year in May, slightly below expectations for a 1.3 percent gain and down from 1.5 percent in April, raising concerns about growing deflationary pressures in the world’s second-largest economy. Producer prices slid 4.6 percent to mark the 39th consecutive month of declines.

Investors are mulling the prospectus of a Fed rate hike as early as September, after Friday’s upbeat U.S. jobs data. Reports on consumer sentiment and retail sales are due this week, ahead of the Federal Reserve meeting on June 16-17.

European markets are trading in red, tracking weak Asian cues, making the safe-have yen more attractive.

In economic news, survey results from the Cabinet Office showed that Japanese consumer sentiment fell unexpectedly in May.

The consumer confidence index dropped to a seasonally adjusted 41.4 in May from 41.5 in April. It was forecast to rise to 41.9.

The yen was higher in the Asian session.

In European trading now, the yen advanced to a 4-day high of 99.98 against the loonie, 8-day high of 88.27 against the kiwi, 1-week highs of 189.52 against the pound and 95.17 against the aussie, off early lows of 100.49, 88.99 and 191.25 and a 4-day low of 96.08, respectively. If the yen extends rise, it may challenge resistance around 98.4 against the loonie, 87.5 against the kiwi, 185.00 against the pound and 94.00 against the aussie.

The yen edged up to 139.52 against the euro and 133.43 against the franc, reversing from early 5-day low of 141.01 and a 4-1/2-month low of 134.48, respectively. The yen is seen finding resistance around 137.5 against the euro and 132.00 against the franc.

Looking ahead, U.S. small business index for May and wholesale inventories for April are set to be announced in the New York session.

At 8:30 am ET, European Central Bank board member Sabine Lautenschlager will deliver a speech to Dutch Finance Committee at the Hague, Holland.

Subsequently, ECB Supervisory Council’s President Daniele Nouy is expected to speak at a conference in Berlin, Germany at 10:00 am ET.

The material has been provided by InstaForex Company – www.instaforex.com

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