Morning Forex Briefing

The USD is trading mixed at the start of New York this morning after a quiet overnight action that again saw the issue of Yen cross-spreading remain at the front of trader interest. Remarks by Japan’s Ministry of Finance helped the USD/JPY in Asia lifting the pair into offers at the previous resistance level of 120.80 but exporter offers capped the move early; the MOF is suggesting that the G7 will not discuss the Yen at their meeting next week and that the BOJ will act “when appropriate” regarding interest rates. Traders note that although the USD appears to be topping against the major currencies the Yen volatility remains a concern due to cross-spreading.

Yen pairs have been soaring to record highs the last few weeks and analysts are doubtful that further gains will come easily suggesting that the Yen is “too low” in the minds of some market players. Due to the high degree of interest and rhetoric around the current Yen posturing it seems likely to me that the Yen is going to suffer from higher volatility near-term as traders decide if there is more upside for the USD or less; depending on how the market sees Yen weakness moving forward. For the most part, the USD/JPY is an issue of Yen weakness—