Crude oil was subdued as investors’ doubts that Organization of Petroleum Exporting Countries (OPEC)-led output cuts would dent a three-year glut offset data shown a drop in U.S. inventories prompted risk aversion supported JPY and narrowed U.S.-Japan 10-year yield differential that weighed on USD yesterday. On the other hand, JPY gained as Japan’s government raised its overall view of the economy for the first time in six months reflected a gradual pick-up in private consumption and underscored its confidence that an export-led recovery was broadening with a government official said a pick-up would be sustained on the back of the improving job market and households incomes which prompted the upgrade of the overall assessment, it pressured USD/JPY down to 110.92 day low.
However, the Bank of Japan (BOJ) Deputy Governor Kikuo Iwata dismissed the need to raise interest rates any time soon and stressed that the economy still required support from powerful monetary easing with inflation far from the BOJ’s 2% target added that he called for maintaining a loose pledge to increase BOJ’s government bond holdings at a 80 trillion JPY per year weighed on JPY. Besides, data shown weekly Initial Jobless Claims in U.S. increased to 241,000 but Leading Economic Indicators rose 0.3% as expected in May with Monthly Home Prices grew 0.7% and Home Prices Index edged up to 248.2 in April were stronger than forecast, it pushed USD/JPY up to 111.44 day high. Forecast USD/JPY will be capped below 111.35-55 with support at 110.60-80 today.