Since Wednesday’s exceedingly dovish Fed meeting, US bond yields have been under downward pressure and in turn we have seen USDJPY selling off sharply – reversing most of the gains made earlier in the week. This is not the direction that Japanese policymakers want to see the currency pair heading, as their discomfort with yen strength has been apparent for some time. Japanese Prime Minister Noda took his warnings to the market a notch higher overnight by saying he expects the central bank to take “bold” policy actions to counter yen appreciation; however the currency markets appeared to take little notice of his war cry, and continued pushing USDJPY to lows of 76.90. Overnight, the BoJ released the minutes of its latest monetary policy meeting where they once again struck a very dovish tone, but are certainly not giving away any clues about when or if they are ready to engage in another expensive bout of aggressive currency intervention. Our view is that the 75.00 level should be viewed as a line in the sand, and Japanese officials would be loathed to allow the currency pair to drop below that level. As such, we’d err on the side of expecting intervention anywhere below 76.00, and potentially at any time.
In other news, RBNZ Governor Alan Bollard was on the wires today providing some insight on the New Zealand central bank’s recent monetary policy meeting. Rather than focusing solely on the European debt crisis, he clarified that a major reason there have been no increases in interest rates since the post-earthquake emergency rate cut in March 2011 is that ongoing aftershocks in Christchurch have delayed reconstruction efforts.
Coming up in today’s session, we have a number of important data releases due. The morning session includes Swiss KOF leading indicators, Swedish retail sales, and Eurozone M3 money supply; but the marquee events will come in the afternoon, with the release of US Q4 GDP and U.M consumer sentiments.
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In other news, RBNZ Governor Alan Bollard was on the wires today providing some insight on the New Zealand central bank’s recent monetary policy meeting. Rather than focusing solely on the European debt crisis, he clarified that a major reason there have been no increases in interest rates since the post-earthquake emergency rate cut in March 2011 is that ongoing aftershocks in Christchurch have delayed reconstruction efforts.
Coming up in today’s session, we have a number of important data releases due. The morning session includes Swiss KOF leading indicators, Swedish retail sales, and Eurozone M3 money supply; but the marquee events will come in the afternoon, with the release of US Q4 GDP and U.M consumer sentiments.
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M.Zohaib Gadit
Forex Trading Consultant
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