Choppy trading for the dollar against the yen

Good Morning,

- Choppy trading for the dollar against the yen on Monday, under pressure as risk aversion pushed down U.S. Treasury yields and new lows for the oil as International Energy Agency on Friday cut its outlook for demand growth in 2015.

- Fresh 4-1/2-year lows for the Aussie at $0.8204 on falling commodity prices and concerns about global growth, while a hostage incident in Sydney further undermined sentiment.

- Japanese Prime Minister Shinzo Abe's coalition cruised to a big election win on Sunday, ensuring he will stick to reflationary economic policies and a muscular security stance, but record low turnout pointed to broad dissatisfaction with his performance.

- The Bank of Japans' tankan survey showed Japanese big manufacturers' sentiment worsened slightly in the three months to December but corporate spending plans were strong.

-Barclays on EUR/USD: Investors following tactical strategies should consider selling EUR/USD rebounds, advises Barclays Capital in its weekly FX pick to clients. "We expect the recent rebound in EURUSD to be short-lived as economic fundamentals still point to a significant decline in the medium-term with the Fed firmly on a (gradual) policy normalization path, while the ECB is increasingly likely to announce QE in January 2015. As such, we prefer fading any move higher for the pair," Barclays says as a rationale behind this call. On this week's FOMC rate decision, the release of the summary of economic projections (SEP) and Chair Yellen’s press conference (Wednesday), Barclays expect them to remove “considerable time” language from the statement and replace it with an expression emphasizing the “data-dependent” nature of the monetary policy outlook. "However, given our expectations of a divergence in monetary policy between the US and the eurozone, we believe any EUR bounce should be modest and short-lived," Barclays projects.

- Paul Krugman, challenging the consensus of economists and the Federal Reserve’s forecasts, said policy makers are unlikely to raise interest rates in 2015 as they struggle to spur inflation amid sluggish global economic growth. “When push comes to shove they’re going to look and say: ‘It’s a pretty weak world economy out there, we don’t see any inflation, and the risk if we raise rates and it turns out we were mistaken is just so huge’,” the 2008 Nobel laureate said in Dubai. “It’s certainly a real possibility that they’ll go ahead and do it, but probably not, and for what it’s worth I and others are trying to bully them into not doing it.”

- OPEC won't rush to cut oil production even if prices fall as low as $40 per barrel, one of the cartel's members said Sunday. The energy minister for the United Arab Emirates told Bloomberg at a Dubai conference that the middle eastern oil producers believe "the market will stabilize itself." "We are not going to change our minds because the prices went to $60 or to $40," Suhail Al-Mazrouei said.

- Standard & Poor's Ratings Services on Monday said its triple A rating for Australia was not immediately affected by a government mid-year budget update which showed widening deficits ahead. The government forecast its budget deficit would balloon to A$40.4 billion ($33.2 billion) in the year to June, from an initial estimate of A$29.8 billion, as falling prices for key resource exports had opened a gaping hole in tax revenue. "Nonetheless, budget performance over the next few years still appears likely to improve," the agency said.

- China is likely to see economic expansion next year decelerate to 7.1 percent as a slowdown in real estate investment continues. While growth may slow, the outlook for employment and inflation remains stable, and labor-market conditions won’t be a major concern, Ma Jun, chief economist of the People’s Bank of China’s research center, wrote in a working paper dated Dec. 12. The growth projection compares with the monetary authority’s forecast for 7.4 percent expansion this year, the slowest pace since 1990.