JPY Weakness in Focus

Market Brief

The risk appetite rebounded as the attention moved away from the European debt crisis to news out of Japan. BoJ’s Governor Shirakawa decided to step down earlier than scheduled. In reaction, Yen weakened against all of its major counterparts, except AUD, over the last 24 hours even though the BoJ policy board stated that the focus should be on “channel” in which the monetary policy can indirectly affect FX, as the 2% inflation target cannot be reached only by weakening Yen.

USDJPY tested 94.06 early in the session, yet retreated due to stops above 94.00. EURJPY hit 127.71, its highest level since April 2010, GBPJPY rallied to 147.255. NZDJPY came to its lowest since July 2008, while AUDJPY was bearish amid weak December retail sales out of Australia.

EURUSD traded in 1.3560 / 96 range in Asia, thanks to bullish pressure on EURJPY and EURAUD. EURCHF had support at 1.2260, and recovered above 1.2360 ahead of German manufacturing orders release this morning.

On the back of Shirakawa’s decision, Japanese stocks saw massive rally overnight. The Nikkei 225 surged 3.8%, Hang Seng and Shanghai’s Composite advanced by 0.6% and 0.02%, Taiex added 0.25%. Australia’s ASX200 gained 0.78%. The Korean Kospi index was the only one to retreat 0.10%, amid the concerns on weaker Yen hurting country’s exports.

Overseas, the US stock markets advanced yesterday, despite the worse-than-expected ISM non-manufacturing figures. The S&P500 increased by 1.04%, Dow Jones and Nasdaq’s Composite followed by 0.7% and 1.29%.

Today, the economic calendar is light. We will watch German Dec Factory Orders m/m and y/y and the US MBA Mortgage Applications.

Snap Shot

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