DFX: Japanese Yen Gains as Aggressive Rate Cut Curb Carry Trades
The USD and JPY are broadly stronger in Asian trading, with the USD already gaining ground ahead of the RBA action but with USD gains against the AUD, NZD, EUR, GBP and CAD accelerating after the RBA surprised the market with a larger-than-expected 75 bp rate cut. This has underpinned the expectations that emerged on Monday that the BOE will cut by 100 bp and is starting to fuel expectations that the ECB could cut by 100 bp, particularly in the wake of the poor EU forecast released Monday, the slump in EU auto sales and the dislocation emerging in European bond markets. JPY cross selling had already aided the USD prospects from the open with talk of fund redemptions in Japan helping to fuel the cross sales. The cross selling picked up on the aggressive RBA rate cut.
