Yen Rises Amid Rising Risk Aversion

The Japanese yen strengthened against the other major currencies in the Asian session on Wednesday amid rising risk aversion, tracking the weak cues overnight from Wall Street and lower commodity prices.

Weaker-than-expected quarterly Tankan survey and the strengthening of the yen weighed on Japanese stocks. The benchmark Nikkei 225 index is currently down 171.36 points or 0.89 percent at 19,035.

An index measuring business sentiment in Japan was unchanged in the first quarter of 2015, the Bank of Japan revealed in its quarterly Tankan business survey. The large manufacturers' index came in with a score of 12, missing forecasts for 14, but unchanged from the third quarter.

The outlook score is a little more ominous, suggesting that the index will fall to 10 in the second quarter - shy of forecasts for 16, after showing 9 in the previous three months. The survey is closely watched by the Bank of Japan for formulating policies.

Data from Markit Economics showed that Japan's manufacturing sector slowed in March but continued to expand, with a PMI score of 50.3. That's down from 51.6 in February, although it remains barely above the boom-or-bust line of 50 that separates expansion from contraction.

Concerns over the situation in Greece is also negatively impacting sentiment. The Greek government and its international creditors have not reached an agreement on reforms. The debt crisis in Greece is still in a limbo, as the nation scrambles to secure financing ahead of the April 20 deadline.

Iran's talks with the West on its nuclear program failed to be fruitful. The talks extended beyond the March 31 deadline into Wednesday. If an agreement on inspections can be worked out, Iran's oil is expected to add to a global supply glut that has already driven oil prices to the lowest in six years.

Tuesday, the yen showed mixed trading against its major rivals. While the yen rose against the euro and the Swiss franc, it fell against the pound and the U.S. dollar.

In the Asian trading today, the yen rose to near 2-week highs of 128.59 against the euro and 89.21 against the NZ dollar, from yesterday's closing quotes of 128.85 and 89.66, respectively. If the yen extends its uptrend, it is likely to find resistance around 126.10 against the euro and 86.50 against the kiwi.

The yen, which ended yesterday's deals at 120.11 against the U.S. dollar, appreciated to a 2-day high of 119.40. On the upside, 118.23 is seen as the next resistance level for the yen.

The yen edged up to 177.42 against the pound and 123.20 against the Swiss franc, from yesterday's closing values of 177.92 and 123.44, respectively. The yen is likely to find resistance around 176.00 against the pound and 120.40 against the franc.

Against the Australia and the Canadian dollars, the yen edged up to 91.18 and 94.30 from yesterday's closing quotes of 91.35 and 94.66, respectively. The yen may test resistance near 89.21 against the aussie and 91.60 against the loonie.

Looking ahead, PMI reports for March from major European economies are due in the European session.

In the New York session, U.S. ADP private sector employment data, U.S. ISM manufacturing PMI and Canada RBC manufacturing PMI- all for March are slated for release.

At 9:00 am ET, U.S. Federal Reserve Bank of San Francisco President John Williams will participate in a panel discussion titled "Financial Stability: How Essential Financial Stability be to Central Banks?" at the Federal Reserve Bank of Atlanta's financial markets conference "Central Banking in the Shadows: Monetary Policy and Financial Stability Post crisis," in Stone Mountain.

About an hour and a half later, at the same conference in Stone Mountain, U.S. Federal Reserve Bank of Atlanta President Dennis Lockhart will participate in a panel discussion titled "Monetary Policy: Will the Traditional Banking Channel Remain Central to Monetary Policy?".