The pair is likely to trade in a tight range today in Asia, with investors seen refraining from making fresh bets before U.S. lawmakers return to Washington on Dec. 27 to resume their negotiations on measures to avoid the fiscal cliff. There is the widespread view that if the two fail to agree on measures to avoid the fiscal cliff, it would revive risk aversion, thereby spurring buying of such safe-haven currencies as the yen and dollar against higher-yielding currencies such as the aussie. Investors will also focus on political development in Japan, which is expected to convene a special Diet session on Wednesday, when Abe is expected to be approved as new prime minister, replacing Yoshihiko Noda. Local media reports have said that Abe will appoint former Prime Minister Taro Aso as his deputy prime minister and finance minister, and LDP policy chief Akira Amari as the new minister in charge of revitalizing the economy. Ahead of today’s special Diet meeting, the LDP and its partner New Komeito signed Tuesday an official coalition deal in which the two pledged to “bold” monetary easing and achieve 2% consumer inflation. On Tuesday, the rate moved from Y84.60 to Y84.96, which was the highest since April 2011.
EasyForexNews Research Team