Dollar Weak But Losses Capped; Oil Tumbles On Supply Worries

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Japanese Yen surged against U.S. Dollar (CURRENCY:USD) today after Japan reported a wider trade surplus following a drastic drop in exports in April. According to reports, Japan’s trade surplus in April was reported at ¥823.5 billion, which is two times the forecast of ¥493 billion.

Massive drop in exports

Japan’s exports dipped 10.1% year-on-year while imports slumped 23.3%, which is a precursor of sluggish domestic demand. Alongside this, factory activity in the region fell at the sharpest rate during last three years for lack of new orders. This set of data has added to expectations that Bank of Japan will be bound to ease monetary policy to help drive growth. USD/JPY (USDJPY) fell 0.21% to 109.56.

Asian equities had a mixed session as spike in Yen came at the expense of the region’s equities. Nikkei 225 (INDEXNIKKEI:NI225) closed after trimming 0.49% to 16,654.60. Taiwan TSEC 50 Index bucked the trend by adding as much as 2.62% to 8,344.44. An upbeat purchasing managers’ index reading in Germany inspired early day rally in European equities, Markit’s flash composite PMI came in at 54.7 in May from 53.6 in April, touching five-month high. The data uplifted the overall sentiment and helped DAX (INDEXDB:DAX) to add 0.40% to $9,956.43.

Supply outpaces demand

Oil prices and corresponding iPath S&P GSCI Crude Oil Total Return (NYSEARCA:OIL) continued to slide during Asian trade. Distant possibilities of a quick fall in global crude supply prevented prices to spike further. Also, an indication of increased supply in U.S. last week dampened price outlook. Brent Crude hovered around $48 per barrels, down by 0.82% while West Texas Intermediate slipped 1.03% to $47.91.

Russian Energy Minister, Alexander Novak, said last week that the current global oil supplies still outpace demand by nearly 1.5 million barrels per day. The excess persists despite a sharp decline in oil output due to unplanned outages from key oil producers.

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