USD/JPY Daily Fundamental Analysis for May 3, 2011

By ForexMansion.com

The USD/JPY pair starts the week moving to the upside, after it dropped last week to its lowest level in 5 weeks. The main reason behind the upside movement remains the risk appetite, which encourage investors to buy higher-yielding currencies against the Japanese yen.

The heavy drop in Japan's industrial production during the quake, and the slump in exports could force the BOJ to pump more liquidity in the financial markets, causing the Japanese currency to decline against its major counterparts.

Also, the U.S. President Barack Obama said al-Qaeda leader Osama bin Laden had been killed in Pakistan, which supports the rising risk appetite in the FOREX market and make higher-yielding currencies more attractive for the investors.

On the other hand, Bank of Japan kept interest rate remains unchanged at virtually zero, amid the bank's efforts to support the Japanese economy from the March 11 quake aftermath. The Japanese policy makers kept asset-purchase fund unchanged at 10 trillion yen, in addition to the credit-loan program which was kept steady at 30 trillion yen, while the BOJ accept BBB-rated corporate bonds as collateral.

On Tuesday, the United States will release factory orders index for March at 14:00 GMT, where the previous reading was –0.1% and is expected to rise by 1.5%. 

Originally posted here

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