−Quite some significant moves in major FX crosses over the weekend sustaining the rush towards USD recently evident in USD index rising to a 6M high overnight and IMM data showing more USD shorts unwound in the week to 19 Feb.
−JPY: A government official said that the current Asian Development Bank president, Haruhiko Kuroda, is likely to be appointed as new governor of the Bank of Japan (BoJ); USD/JPY briefly rose above 94.50 on this. Kuroda’s views on monetary are in the middle of the spectrum between other candidates such as the conservative Muto and the super-dovish Iwata. If anything, Kuroda would be a slightly less dovish choice than what markets might have wished for, he will undoubtedly be more easing aggressive than current BoJ head, Shirakawa. Also, with one of the new deputy governors set to be the ultra-dovish Kikuo Iwata (not to be confused with the BoJ governor candidate Kuzamasa Iwata), there is no doubt that BoJ will turn substantially more dovish than is currently the case. On the whole, Kouda as new BoJ head will not change our view on monetary policy: we will most likely see some easing measures in connection with the first BoJ meeting in early April. The Japanese government has said that a final decision on a BoJ governor will be made before the end of this week, so JPY could be in for a volatile week as market speculation on BoJ continues. While we expect further USD/JPY upside, we look for the pace to decelerate somewhat; see USD/JPY at 100 in 12M.