Risk-on Amid Chance of Syria War Avertion, USDJPY Revisits 100 - 10.9.2013

Risk appetite improves as there is hope that the war in Syria may be avoided, riskier currencies like the Aussie were underpinned while safer Japanese Yen is losing ground again. The Euro has been stronger than its major counterparty, the US dollar, due to recent uncertainty over Fed asset purchases tapering. The same applies for the sterling against the greenback that advanced near a 7-month high at 1.5750. The US dollar against the Canadian remained under selling pressure falling earlier to support at 1.0355 and now is bouncing on profit taking.

Risk-on was resumed last night as Russia is using its influence on Syria to convince them to surrender the chemical weapons with Obama saying later on that U.S military action would be avoided if Syria responds to this proposal. In addition to that, investors’ appetite was further improved by stronger Chinese Industrial production, Fixed investments and Retail Sales. Asian stocks were rising with NIKKEI 225 rising by 1.54% and Hang Seng advancing by 0.44%.

The USDJPY is rising at the moment benefited by improvement in risk appetite approaching key resistance around 100. Intraday major driver of the currency pair would be political developments for Syria, based on recent proposal by Russia and US Congress vote. Earlier BOJ minutes of the latest meeting revealed that members voted unanimously to keep current easing policy and many of them said that “credibility of fiscal management be maintained in order to ensure the stability of interest rates”.

The US dollar index declined to support at 81.68 still weighed by weaker jobs report the previous week making Fed’s decision to unwind bond buying a hard call and perhaps reduction of the $85B QE program would be between $5-10B less than $10-15B previously expected. Nevertheless, Fed’s decision to reduce QE would diverge from other Central Banks and that is likely to support the US dollar index in the longer term.