Yen Rises Amid Intervention Fears

(RTTNews) - The Japanese yen strengthened against other major currencies in the early European session on Tuesday, amid fears that government officials may step in to stop a further drop in the value of the home currency.

Meanwhile, the JPY may be capped due to predictions of strong fiscal expenditure under Japan's next prime minister, Sanae Takaichi.

Traders remain cautious and are reluctant to take major positions ahead of the monetary policy announcements from the European Central Bank, the US Fed and the Bank of Japan this week. Optimism about a potential U.S.-China trade deal and an interest rate cut by the Fed are aiding market sentiment.

With the Fed widely expected to lower rates by another quarter point on Wednesday, traders are likely to pay close attention to the accompanying for clues about the likelihood of further rate cuts.

CME Group's FedWatch Tool is currently indicating a 97.8 percent chance the Fed will lower rates by a quarter point this week and a 93.0 percent chance of another quarter point rate cut in December.

In the early European trading today, the yen rose to 5-day highs of 177.05 against the euro, 202.85 against the pound and 191.28 against the Swiss franc, from early lows of 177.92, 203.72 and 190.00, respectively. If the yen extends its uptrend, it is likely to find resistance around 174.00 against the euro, 200.00 against the pound and 190.00 against the franc.

Against the U.S. and the Canadian dollars, the yen advanced to 6-day highs of 151.76 and 108.50 from early lows of 152.74 and 109.15, respectively. The yen may test resistance around 148.00 against the greenback and 106.00 against the loonie.

Against the Australia and the New Zealand dollars, the yen climbed to 4-day highs of 99.52 and 87.69 from early lows of 100.16 and 88.20, respectively. The next possible upside target for the yen is seen around 97.00 against the aussie and 86.00 against the kiwi.

Looking ahead, U.S. Redbook report, U.S. S&P/Case-Shiller home price index for August, U.S. Richmond Fed manufacturing index for October and U.S. Dallas Fed services index for October is slated for release in the New York session.