USD-JPY - Short-covering on USD-JPY and JPY crosses along with new Toshin fund launches has supported USD-JPY in Asian trading. Toshin funds estimated to be worth $1.2 bln were launched today with subsequent launches seen through the end of this week, into next week and the month end. The Toshin funds are expected to be focused on commodities and commodity currencies such as the AUD, NZD and ZAR. Traders also reported Asian central bank demand that also helped underpin USD-JPY as well. USD-JPY, after finding support ahead of 95.00 in late NY, has rallied as high as 95.55 taking out some exporter offers around 95.50. Further selling interest is reported at 95.70/80 and 96.00. Bids remain on dips under 95.00 at 94.75/80 though stops are eyed below that level with more stops under 94.50. EUR-JPY has rallied from early Asian lows of 133.70 to trade to highs of 134.59, triggering stops above 134.40 in the process. 135.20 is the next resistance level. Weighing on JPY was the Japan trade data which showed exports declining -40.9% y/y in May form -39.1% y/y in April as exports lose some traction. BOJ's Nakamura says it will take some time for Japan to make a full recovery, though stated that the economy is currently moving in line with April's BOJ outlook. However, Nakamura warned that the BOJ will need to watch the risk of the Japanese economy undershooting the BOJ's forecast though he sees Q2 GDP turning positive. Nakamura also stated that the central bank did not have any present ideas about ending measures to support corporate financing when the measures expire in September, adding that the "environment for corporate finance may remain severe on the whole. Financial markets are improving but have not yet normalized."

AUD-USD was unable to sustain the rally above 0.7950 in Asia after a rally to 0.7979 in NY on Tuesday. Gains in early Asia were linked to AUD-JPY demand which in turn is linked to Toshin fund launches aimed at attracting Japanese workers' summer bonuses. Toshin funds are seen being launched through the end of the month. AUD-USD rallied to highs of 0.7960 but similar to the attempts by EUR and GBP to rise, gains were unsustainable with the market unwilling to take on new positions ahead of the FOMC statement later today. Also tempering the AUD gains is a retreat in commodity prices with oil dropping about $1 after the news that Japan oil imports dropped sharply in May. Gold and copper are also easier.