Yen Rebounded on Credit Crunch by Yan Xu

The yen advanced against high-yielding currencies, recovering after yesterday¡¯s sharp slide, as several bad news related to credit market raised risk aversion.

An Australia hedge fund, Basis Yield Alpha Fund, collapsed today because of US home loan defaults. New Zealand-based Five Star Consumer Finance Ltd. also filed bankruptcy today. Those negative news added to worries over the subprime and credit market. Large amounts of hedge funds suffered huge losses from securities backed by US home loans.

The Australian dollar fell from 95.70 to as low as 93.67 versus the yen. The dollar was trading in high 115 versus the yen during the US trading session today.

The market was little moved after a bunch of US data came out in line with expectations. US preliminary GDP rose at an annul rate of 4.0% in the second quarter as expected. US weekly jobless claims increased from 322k to 334k, slightly above the estimate of 322k. US PCE rose 4.2% in the second quarter, below the forecast and previous reading of 4.3%. The market tomorrow will focus on the monthly PCE report, Chicago PMI, durable goods orders, and University of Michigan consumer sentiment index.

Fed Chairman Ben Bernanke is scheduled to have a speech on Friday at the Federal Reserve annual symposium in Jackson Hole, Wyoming. In an August 27 letter to New York Senator Charles Schumer, Bernanke said that the central bank is closely monitoring the market and is prepared to act as needed.

The market is waiting for interest rate decisions from several central banks including the European Central Bank, the Reserve Bank of Australia and the Bank of Canada.

EURUSD will face interim resistance at 1.3650, followed by 1.3680 and 1.37. Additional ceilings will emerge at 1.3730, backed by 1.3750. Support starts at 1.36, backed by 1.3570, 1.3550 and 1.3520. Subsequent floors are eyed at 1.35.

GBPUSD encounters interim resistance at 2.0130, backed by 2.0150 and 2.0180. Subsequent ceilings will emerge at 2.02, followed by 2.0230 and 2.0350. On the downside, support begins at 2.01, followed by 2.0080 and 2.0050. Additional floors are eyed at 2.0020, backed by 2.0000 and 1.9970.

USDJPY encounters interim resistance at 116, backed by 116.20 and 116.50. Subsequent ceilings will emerge at 116.50, followed by 116.80 and 117. On the downside, support begins at 115.50 and 115.20, followed by 115. Additional floors are eyed at 114.80, backed by 114.50 and 114.20.