Yen Erases Gain as Focus Returns to U.S. Data After LDP Defeat

• Yen Erases Gain as Focus Returns to U.S. Data After LDP Defeat

The yen erased gains as the focus returned to U.S. economic data due this week after earlier surging on a local election loss in Tokyo by Prime Minister Shinzo Abe’s ruling party.

Japan’s currency jumped as much as 0.4 percent against the dollar as the Liberal Democratic Party secured 23 seats, its least ever in the capital, spurring demand for safer assets. Spot gapped lower as some macro funds followed leveraged accounts in hitting bids down to the 111.91 session low, before a lack of follow through from institutions and Nikkei stock futures saw spot rising back to Friday’s close, Asia-based currency traders said.

“Stocks are showing little reaction to Japan’s election as markets wait and see whether the result will have any impact on a national political level,” said Koji Fukaya, chief executive officer at Tokyo-based FPG Securities. “The focus this week is U.S. data, whether they will support the Fed’s hawkish view. There is more risk to the dollar-yen’s upside given how markets seem to be more cautious about the economy.”

Australia’s dollar fell for the first time in four day after a Bureau of Statistics report showed building approvals declined in May. U.S. data this week that may influence the outlook for Federal Reserve policy include manufacturing data Monday, Fed minutes Wednesday and payrolls data on Friday.

• USD/JPY rises 0.1% to 112.52 after falling to 111.91 in early morning trade in Tokyo
  • Tokyo Governor Koike’s Tomin First party won 49 seats in the 127-seat assembly, NHK said, up from 6 beforehand
  • Market concern may deepen on risk Abe can’t extend term as LDP chief, which would push down USD/JPY in near term, Citigroup says in email. Won’t be surprised if pair pulled back toward 110 in coming weeks
  • Nomura says Abe unlikely to call snap election after Tokyo loss
  • Tankan survey of sentiment among large manufacturers rose to 17 from 12 three months ago, beating est. of 15
• AUD/USD drops 0.2% to 0.7675 versus 0.7668/95 range
  • May building approvals fell 5.6% m/m; estimate 1.3% drop
  • Private-sector home approvals rose 0.6% m/m
  • Option expiry Tuesday at 0.77 for AS$1.73b
• GBP/USD declines 0.2% to 1.2990
  • Call options 1.3000 strike for notional GBP300m expiring Monday