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By xemarketanalysis February 13, 2018 1:51 pm
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    XE Market Analysis: Japanese Yen Hits Five-Month Highs as Markets Remain Nervous


    • GBP rises after higher UK inflation data. 
    • Yen rises over 1%, prompting comments from the government minister.
    • South Africa's President Zuma is recalled by his ANC party and will respond by tomorrow.
    • Global stocks are under pressure as risk aversion is driving FX gains for CHF and JPY.
    • Oil prices are at two-month lows as supply increases seen overtaking demand.


    The Japanese Yen has risen to a five-month high as investors remain nervous following the heightened levels of volatility seen in global stock markets over the past week. Expectations that the Bank of Japan will begin to scale back its monetary stimulus this year due to a strengthening economy have also benefitted the Yen which is up 4% versus the US Dollar this year.  


    The Dollar is softening with investors trying to draw conclusions on what last week's sharp selloff in US stock markets will mean for US monetary policy. Market pricing has signaled less confidence that the Fed will follow through with three hikes this year which appear to weigh on the Dollar. Consumer price inflation data is due tomorrow and may provide a fresh direction for the Greenback as the focus remains on whether we are finally seeing the economic recovery boost price pressures.


    The Pound rallied strongly early in the European session after UK inflation data showed CPI remained close to its highest level in almost six years last month, supporting the BoE’s assessment that it may need to raise rates sooner and more than previously indicated. It has slipped back slightly as markets await further news on the transition deal that was cast into question by Michel Barnier last week, but it remains higher on the day still. 


    The Euro is performing well today and is one of the top performing G10 currencies today amid broad US Dollar weakness. The near-term fundamental risk lies with tomorrow's industrial production and Q4 GDP data for the Euro area.  


    The Canadian Dollar is marginally weaker on the day, remaining under pressure alongside oil prices. The lack of recovery in the Loonie having lost almost 3% in a week signals the currency could be in for further short-term losses.


    The Australian Dollar is flat on the day as it attempts to recover further from its near-two week decline this month. The tentative recovery in risk sentiment in Asia saw the Aussie in positive territory but it is struggling to hold onto the gains. Comments from RBA Assistant Governor Luci Ellis stated that any pick up in wage growth was likely to be slow and protracted to not help the currency.


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