Yen Choppiness Resumes

At 4:30 AM UK July PS net borrowing (exp –6.1 bln sterling, prev 7.443 bln sterling)
UK July PSNCR m/m (exp –11.0 bln sterling, prev 10.339 bln sterling)
At 10:00 AM US July Leading Indicators (exp 0.4%, prev –0.3%)

The foreign exchange market remained volatile in early Tokyo trading, with the yen pairs leading the movement amid lingering risk aversion. Although last week’s 50-basis point cut in the Fed’s discount rate tempered growing fears of a credit crunch and its impact on the economy, traders will remain cautious as it remains uncertain whether the FOMC will cut the Fed fund rate next month. The major currencies rebounded against the yen on Friday and continue to hover around those ranges, with dollar/yen near 114.20 and euro/dollar steady just beneath the 1.35-level.

The week ahead is light on key economic data, but some highlights include the Bank of Japan’s monetary policy decision, Japan’s trade balance, Germany’s ZEW survey, Germany’s GDP, UK GDP and US durable goods orders. However, the currency market will likely take its cues from the credit and equity markets.