The US budget discussions may have been going on for a while without resolution, and the October 17th deadline for reaching the debt ceiling might be worryingly close, but investors and industry experts remain confident that US lawmakers will forge an agreement and avoid a cataclysmic default.
The Japanese Yen exchange rate was in the region of 157.6850 Yen to one British Pound as of 10:30 am GMT
Consequently, the appeal of the safe-haven Yen lessened and the Asian asset slid against peers like the Pound and US Dollar.
On Tuesday top ratings agency Fitch Ratings implied that the political fracas in the US could see the world’s largest economy have its sovereign rating cut from AAA – adding to the many reasons why a viable budget solution must be found.
Although hints that an announcement would be made yesterday proved false, several Senate aides have intimated that negotiations are ongoing and resolution is close, and the US Dollar was supported as a result.
According to one Singapore based trader; ‘What lies at the very root is optimism. There is a strong expectation that a deal will be reached in the end, that a default will be avoided.’
The GBP/JPY exchange rate hit a low of 156.6390
In the view of forex specialist Callum Henderson, if a deal for reaching the debt ceiling was struck ‘the short-term reaction would be [Dollar] positive […] investors would sell the Yen, sell other safe havens such as the Swiss Franc and buy back Dollar short positions that have been put on ahead of such a deal. Thereafter people would say, well hang on a minute, maybe US growth will be hurt in the fourth quarter by what’s been going on for the past few days and weeks, so you may get some degree of reassessment.’
The Yen extended declines against the Pound during the European session as the British currency was supported by unexpectedly strong UK employment data.
Losses were exacerbated as Standard & Poor’s 500 Index futures advanced.
While US news will be driving market movement in the days ahead, tomorrow’s machine tool orders report for Japan will also be of interest, as will Friday’s speech from Bank of Japan Governor Haruhiko Kuroda.
Current Japanese Yen (JPY) Exchange Rates:
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The US Dollar/Japanese Yen Exchange Rate is currently in the region of: 98.3500 >
The Pound Sterling/Japanese Yen Exchange Rate is currently in the region of: 157.6850 >
The Euro/Japanese Yen Exchange Rate is currently in the region of: 132.9970 >
The New Zealand Dollar/Japanese Yen Exchange Rate is currently in the region of: 82.7980 >
The Australian Dollar/Japanese Yen Exchange Rate is currently in the region of: 93.7758 >
(Correct as of 10:30 GMT)