U.S. ECONOMICS: Yen Undermined by Abe Tax Cuts, Nikkei Rally

Another solid session in Asia rekindled the risk-on trade across the globe, luring investors away from the yen and back into the U.S. dollar. The U.S. unit is higher against most of the majors, pushing through key resistance at the 200-day moving average against the yen as expectations for more stimulus from China and Japan drives USD/JPY to a high of 120.94 at the North American open, a gain of 0.50%.

The Nikkei skyrocketed nearly 8% overnight on the heels of Prime Minister Shinzo Abe’s pledge to lower corporate taxes in 2016 to stimulate investment. The rally in Japan’s stock market pushed the yen consistently higher throughout the overseas session with only a brief bout of profit-taking pressure at the European open. After shaking off a brief retreat to 120.40, the USD/JPY is back on the move, chipping away at 121.00 at the U.S. open.

The British pound flatlined early on, but turned lower on the combination of weak UK manufacturing data and a wider UK trade deficit. GBP/USD pulled back to 1.5354 from 1.5400, giving the dollar a gain of 0.30%, though currently unable to take out the 200-day moving average at 1.5352.

EUR/USD moved in tandem with the other dollar crosses on a lack of market-moving news specific to the euro. From 1.12 overnight, EUR/USD declined as low as 1.1138 at the North American open giving the dollar a gain of 0.30%.