Asia Recap: Market keeps piling on USD longs

By FXstreet.com | August 24, 2014 AAA

FXStreet (Bali) - It is becoming a familiar theme to see the US Dollar outperform its rivals, and today's Asian session was not exception, with the currency making new highs.

Part of the gains seen in the US Dollar came as a consequence of EUR, JPY and NZD weakness. EUR/USD touched a new 1-year low at 1.3196 before stabilizing at 1.32 as the market starts to speculate that ECB's Draghi will take bolder actions to fight EZ deflation. USD/JPY also printed a new 7-month high at 104.40 (interbank trading but not reflected in retail platforms) following Kuroda's dovish remarks at the Jackson Hole Symposium over the weekend.

NZD/USD also hit a new 6-month low at 0.8333 following heavy buying interest in AUD/NZD, with an unwinding of macro shorts on the pair reported as one of the NZD selling trigger. GBP/USD also made new marginal lows ahead of Monday, in which trading activity will be very thin given UK bank holidays, which comes at a time where many European desks enjoy summer breaks.

On the fundamental front, Bank of Japan Governor Haruhiko Kuroda, who attended the Jackson Hole Economic Policy Symposium in Wyoming, said - via Reuters - that the Central Bank may have to ease policy for 'some time' to slay deflation. Kuroda also suggested that they might be just 'halfway' through to beat deflation.

Another article that caught market attention was one presented by Reuters, titled "pressure builds within Fed to signal a new policy course". According to the article, "pressure is building within the Federal Reserve for officials to move as early as next month to more clearly acknowledge improvements in the U.S. economy and lay the groundwork for the central bank’s first interest rate hike in nearly a decade."

The Financial Times also published an article about the decreasing inflation expectations in the Eurozone, noting that the sharp decline in price levels throughout Europe are causing inflation expectations to gradually be revised lower. ECB's President Mario Draghi said late Friday that the bank “will acknowledge these developments”, a statement that, as the Financial Times notes, "is likely to fuel speculation it will take bolder action against deflation threats."

The economic calendar in Asia was vacant of any indicator, and while European markets are open for business as usual, with the UK on bank holidays, traders will have to wait until the US markets come online to see a decent increase in trading volumes.

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