Forex: USD/JPY extending losses on Monday

FXstreet.com (Barcelona) - With Japan’s Nikkei Stock Average out for Showa Day, the USD/JPY first eased to 97.36 low, extending last week’s losses, but was able to retrace part of the losses to 97.80 (-0.30% on the day) ahead of the European session. Spain retail sales and HICP, Italia wage inflation, EMU confidence, Greece PPI, and German CPI will be published today during the European morning.

It’s being reported that Japan may diversify some of its FX reserves into the bond markets of South East Asia and the announcement could come as early as Friday May 3rd. “Admittedly, the scope for flows into EM currencies is significant. Japan has a total FX reserve pool of US$1.24 trn and, as Chart 1 shows, only a tiny fraction of this is currently invested in currencies outside the IMF's SDR basket (USD, EUR, GBP, JPY, CHF). There is also a strong tendency to hold reserves in the form of bonds rather than cash deposits, which appears to bode well for EM bond markets in particular”, wrote UBS analyst Gareth Berry, adding that such process is not yen-negative, it’s a very modest dollar-negative and it will proceed at an agonizingly slow pace.

Mataf.net analysts point to resistance at 97.75, 98.00 and 98.35. On the downside, supports might be found at 97.35, 97.15 and 96.60.