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The Yen was further down today since pairs were focused on the JAL’s expected bankruptcy announcement (0800GMT).

The USD continued its gain, as Forex investors were rallying their speculation that JAL will file for bankruptcy, leading to additional data proving that the Japanese economy is continuing to fall.

The Bank of Japan’s recent announcement that they intend to fight deflation resulted in further loose monetary policy. With the US waking from its recent holiday, investors might be slow in their trading activity today

CAD/JPY – 64 pips (87.96-88.58); AUD/JPY – 95 pips (83.27-84.22);
USD/JPY – 46 pips (90.61-91.05); GBP/JPY – 137 pips (147.51-148.88)

GBP. This morning (0930GMT), the UK Consumer Price Index Report for December was due, which is an important indicator for the emerging inflation trends and further monetary policy.

Inflation pressures have been rising as a result of the rising commodity prices and sterling weakness to name a few.

For example, Core Producer output prices rose in December by 0.7% – the biggest monthly gain since May 2008.

These emerging pressures, together with the possibility that some retailers could raise prices ahead of the VAT increase on 1 January, raise the probability that inflation rose further during last month.

GBP/USD – 128 pips (1.6249-1.6377); EUR/GBP – 52 pips (0.8780-0.8832)
GBP/CAD – 94 pips (1.6719-1.6813); GBP/JPY – 137 pips (147.51-148.88)

CAD. Today, the Bank of Canada Interest rate (1400 GMT) should show this old benchmark rate to remain at its record low of 0.25% and repeat the pledge to leave it unchanged through June, as an appreciating currency threatens to hamper the economic recovery.

Pedro Antunes, the director of economic forecasting at the Conference Board of Canada in Ottawa stated that: “Any suggestion they will raise rates before the U.S. would probably drive up the currency”, adding today that “They will be hesitant to make any changes” .

USD/CAD – 66 pips (1.0246-1.0312); EUR/CAD – 63 pips (1.4737-1.4800);
AUD/CAD – 64 pips (0.9452-0.9516)

Last Thursday, in advance of the Christmas holiday and the last trading day for the week, the USD was mixed in extremely light Forex trading.

The greenback fall on the early part of the trading session as a result from worse than expected housing data; yet, data releases that were published late in Thursday’s session, showed an increase in durable good orders, as well as a larger decrease in first time unemployment filers.

Thursday’s events are not indicative of the market sentiment, since most of the professional FX traders and institutions took the day off, leaving the less experienced and traders to control the market.

At the close, the Dollar was off 0.2% to the Euro to 1.4396, down 0.18% against the Japanese Yen to 91.18, unchanged with the British Pound Sterling at 1.5962, up 0.08% against the Canadian Dollar to 1.0499, down 0.02% to the Australian Dollar to 0.8847, up 0.1% versus the New Zealand Dollar to 0.7063, and down 0.35% against the Swiss Franc to 1.0356.

Trading the YEN – On Thursday, the Yen gained across the board, despite the release of a new report showing that government scandal and mistrust in the new prime minister’s recovery.

In the five months since August, the Prime Minister, Yukio Hatoyama has witnessed his approval rating fall from 75% to 45%, the largest drop in confidence for any leader in the shortest time.

Much of this negativity is a result more from skepticism about plans to reorganize the country’s economic machine – an adventurous task not accomplished by any government in the past fifteen years.

IN any case, the indictments did not affect the Yen in the shortened, lightly traded session.

At the close, the Yen was up 0.32% against the Euro to 131.26, up 1% to the British Pound Sterling to 145.54, up 0.18% versus the Australian Dollar to 80.67 and up .09% to the Swiss Franc to close the session off at 88.0

Please keep in mind that once again, we are talking about a shortened week in the Forex Market.

Trading is expected to cease on Thursday, December 31st for the New Year Holiday. This coming week, traders are expecting an extremely light and potentially volatile trading.

Due to the holidays, this is also the lightest week for data releases, as many government institutions are working on scaled down hours.

On Tuesday, the USD continued to do well in very light trading, holding on to small gains in response to a moderate rise in US Treasury Bond yields.

Nevertheless, the USD did have a hard time getting past the Yen and Euro, since the concern over the recent adjustment sent some Forex traders out of the greenback. 

The US Department of Commerce has revised last November’s GDP data, which showed a 2.8% growth for the third quarter. 

This revision shows a 2.2% growth rate, whereas market analysts predicted that the 2.8% would remain. 

Data also has shown that existing home sales in the US rose in and unexpected 7.4% in November, a three year high. 

Although the news appear to be good, the excitement has been  muted by the disclosure that home prices have fallen to their lowest level since 2005, together with the fact that much of the home purchasing has been done with grants and subsidies from the Federal Government.
At the present time, the market is not sure when the economy will recover. There are considerable pieces of data that are contradicting one another. 

Since the recent USD has been based on short-coverings; the traders are sizing up their options for the next year and hedging themselves against any possibility.
At 10:00PM GMT, the US Dollar was trading down 0.04% against the Euro to 1.4278, up 0.55% to  the Japanese Yen to 91.67, down 0.4% against the British Pound Sterling to 1.5961, down 0.3% versus the Canadian Dollar to 1.0589, down 0.33% against the Australian Dollar to 0.8783 and up 0.26% against the Swiss Franc to 1.0489.

JPY Trading – The Yen has been down across the board, as investors have continued analyzing last week’s declaration of  “war on deflation.” 

On Tuesday reaffirmed Masaaki Shirakawa , Japan’s Bank Governor, that  BOJ shall maintain its current “effective zero interest rates” and is ready to act to fight deflation. 

Japan, an export economy is being hurt by the recent rise in Yen value since major consumers of Japanese products, the US, Europe and Great Britain, are having problems maintaining strong currencies. 
At 10:20PM GMT, the Japanese Yen was trading down 0.6% against the Euro to 130.91, down 0.33% against the British Pound to 146.57, down 0.3% to the Australian Dollar to 80.55 and down 0.55% versus the Swiss Franc to 87.52.