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The euro major got a lift on the day as momentum continued from the midweek dollar selling.  With rates likely to stall in the near term for the worlds largest economy, traders have turned their attention to economic fundamentals and continued rate hikes in the Euro zone.  This reigning sentiment has translated into a boost for the EURCAD currency cross even as major multinationals and North Asian central banks sold into momentum.  On the flipside, the Canadian leg was dealt a major blow at the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New York open.  According to Statistics Canada, consumer prices actually declined opposed to consensus figures that pitted the report to show an additional increase in inflationary suggestions.  In the month of June, prices fell 0.2 percent from the previous month, placing the annualized figure at 2.5 percent.  The dip plays very nicely into the central banks prediction that price increases would abate and sets up the market for anticipating a continued stall in any potential rate hike scenarios.  Futures traders are additionally pricing in the probability as Canadian banker acceptances traded lower on the day.  However, a caveat does remain as the labor market continues to remain tight.  With no slack afforded to the overall market, wage price inflation could very well peek its ugly head, renewing concerns.   

CADJPY

The Japanese yen received a boost on the day as traders flooded the market in anticipation of a rumored China revaluation on the anniversary of last years explosive decision.  The notion bucks the weeks bearishness, even following the first rate hike in approximately six years and a report by the central bank on the end of  deflationary conditions.  Maybe a turn for the better?  Either way, the yen remained the favorite of the day as the inflation data was less than desirable for the Canadian dollar.  The dip was despite crude contracts that rose above $74.00 to settle at $74.43 to end the week.  Looking ahead, further yen momentum may be likely considering positive results that are expected from next weeks slew of data.  For the most part, inflationary suggestions are estimated to emerge as most of the subsequent reports, including jobless rate, are expected to remain unchanged.  Both Tokyo and National consumer price index reports are expected to tick higher compared to last months dips.  In addition, the economys merchandise trade surplus is expected to rise once again after falling for consecutive months.  A suggestion that global demand continues to fuel the recovery, the surplus and additional reports may spark further hiking speculation.

USDJPY

Released in the overnight, news of a possible revaluation effort by the Peoples Bank of China sparked yen bidding as the Chinese currency, again hit a record high against the dollar.  Trading higher on the over-the-counter market, the yuan set another record high of 7.9820 against the dollar on the eve of the anniversary.  However, gains in favor of the Japanese currency were capped as the ultimate decision came down to a bank reserve requirement raising of 50 basis points.  The decision is to calm the flow of capital and help in hopefully cooling down an economy that some have dubbed overheating.  At this point, a handful in the market are even making comparisons to the Asian financial crisis of 1997.  Nonetheless, the decision quelled speculation of a near term flexibility decision, but still left the yen higher on the day versus the greenback.  Heading into the weekend, orders looked skewed to one side as bidders for the pair are coming in stronger.  Currently, buy orders are riddled around the 116.20 figure.