Monday, February 25, 2013

Yen slips further on BOJ nomination

Earlier today the Yen dropped close to a three-year low to the Dollar. Japan's government has now narrowed down its list of candidates that could run the central bank and take on Prime Minister Abe's plan to expand monetary stimulus.
 
The Yen was down versus all its major counterparts as an official disclosed that it was likely that Abe would nominate Asian Development Bank President Haruhiko Kuroda for BOJ Governor.

So what we see today, is the market factoring in speculation that Kuroda will be the new BOJ governor, and that he favours an aggressive easing policy.

The BOJ's current Governor Masaaki Shirakawa, and his two deputies, are set to step down on the 19th of March. As things stand, I think that the BOJ has significant room to further loosen and add to measures this year.

Earlier today the Yen weakened by 0.7% to 94.09 per Dollar and depreciated 0.7% to 124.13 per Euro.

The Pound though dropped for a second day, following Moody's Investors Service having, for the first time, stripped the U.K. of its top rating. It cited weakness in the nation's growth outlook and also challenges to the U.K government's fiscal consolidation program when it lowered the rating on the U.K. by one level to Aa1 from Aaa.

This being the case, I fully expect that other major rating agencies will follow soon.

The Pound fell 0.2% to $1.5128 and by 0.2$ to 87.19 pence per Euro.
 
  The Euro remained little changed at $1.3193 as investor focus now turned to the results of Italian elections.

Voting stations close at 3pm in Rome today and then the initial estimates will be released.

Many economists predict that a coalition government is the likely upshot and that this could take a week or two to form. Any uncertainty is bound to weight on market sentiment.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six U.S. trading partners, rose to an almost six month high, by 0.1% to 81.591.

Ben Bernanke, the Federal Reserve Chairman, is set to deliver his semi-annual testimony on monetary policy to the Senate Banking Committee on Tuesday.

On Wednesday, he is set to speak before the House Financial Services Committee. Bernanke recently said that the U.S. economy is "far from the fully healthy and vibrant conditions that we would like to see."