[B]Market Review - 17/01/2013 21:15 All times in GMT
Yen tumbles on renewed speculation of aggressive BoJ monetary easing[/B]
The Japanese yen weakened broadly on Thursday on renewed speculation that the Bank of Japan will embark on aggressive policy easing next week. The single currency also rallied against the dollar due to active buying of euro especially versus the Japanese yen and strong Spanish bond auction.
Earlier in Asia, although dollar yeb climbed initially to 88.80 in Tokyo trading after the release of Japan’s tertiary industry index which dropped by 0.3% in November, adding speculation that the Bank of Japan will take aggressive stimulus measures next week, price retreated to 88.13 at Asian midday due to intra-day broad-based cross unwinding in yen, however, yen fell sharply on Bloomberg report citing source from Dow Jones quoting comments from Japan’s EconMin Akira Amari who said ‘yen still in process of correcting and yen comment earlier in week was misinterpreted.’ The intra-day rally in eur/jpy cross (the cross pair rallied from 117.02 to a 2-1/2 year high at 120.31) pushed the pair well above 88.80 to 89.58 in New York morning after the release of U.S. housing data and jobless claims. Later, price rose above Monday’s high at 89.67 to 90.14 in New York afternoon on the news that the BOJ is mulling on scrapping the 0.1% floor it sets on short-term interest rates and pledging to buy assets open-endedly until 2% inflation is foreseen.
U.S. housing starts in December came in at 12.1%, much stronger than the forecast of 3.3% and -4.3% in November. U.S. building permits came in at 0.3%, versus the forecast of 0.5% and the previous reading of 3.7%. U.S. jobless claims fell to 335K from the previous week of 372K.
Although the single currency retreated from Asian high at 1.3315 to 1.3270, the pair rallied in European morning on active cross buying of euro versus other currencies due to the talk of good demand at Spanish debt auction. Price climbed to 1.3378 in New York morning after the release of U.S. housing data and jobless claims but then retreated to 1.3334. However, price rose again to 1.3387 in U.S. afternoon due partly to the rally in U.S. equities.
Spain sold 2409 million euros of 2015 bond, 1584 million euros of 2018 bond and 512 million euros of 2041 bonds. The average yields are 2.713%, 3.770% and 5.696%, versus the last auction of 3.358%, 3.988% and 6.002% respectively.
Earlier in Europe, the euro was supported as the spokesman from the Portugal government said ‘country doing all to return to bond market as soon as possible.’
Despite cable’s brief fall from Asian high at 1.6018 to 1.5991, the pound rose in tandem with euro to 1.6039 ahead of New York open, however, active cross selling of sterling versus euro pressured the pair below Wednesday’s low at 1.5975 to 1.5956 in U.S. morning before staging a recovery to 1.6010 in U.S. afternoon.
In other news, Japan LDP leader Ishiba said ‘yen is in process of escaping from excessive strength; monetary policy must be aggressive to help economy recover; we have to correct excessive yen strength and prevent hollowing out of industry.’ The IMF’s managing director Lagarde said ‘economic collapse avoided in many parts of the world; countries should follow through on policies to avoid exacerbating uncertainty; more fiscal consolidation needed in Portugal, authorities have to decide what is most appropriate; U.S. debt ceiling fight could be catastrophic for global economy if it is not resolved in time; has huge faith in U.S., so hopes debt ceiling resolved appropriately and in time.’
[B]Data to be released on Friday: [/B]
New Zealand CPI, China GDP, Industrial Production, Retail Sales, Fixed Assets Inv Urban, Japan Industrial production, Capacity utilisation, Italy industrial orders, U.K. Retail sales, U.S. University of Michigan consumer confidence.