Thursday, March 28, 2013

the Bank of Japan (BOJ) Governor, reiterated policy easing options.

Firstly, let me start off by wishing those that celebrate Easter this weekend, a very peaceful weekend and take another opportunity to thank you for following our daily market analyses.

Friday is a holiday in most of Europe, the U.S. and much of Asia.

In line with the short holidays, we won't be publishing on Friday and Monday but will resume again as usual on Tuesday.
BoJ Governor Kuroda earlier today addressed Japan's upper house lawmakers, having recently told the lower house that his goal is to achieve 2% annual inflation in two years.

His testimony basically entailed his view that that policy makers will need to "lower the longer end of the so-called yield curve" and also that they could need to purchase risk assets.

The central bank is due to meet to discuss policy on the 3rd and 4th of April and while Kuroda does what is now generally expected, I think that we will likely see limited reaction in the currency.

For the past six months expectations of additional BOJ stimulus have driven the Yen down by 17%. In comparison, over the same period, the Dollar has risen by 2.8% and the Euro by 2.1%.

Earlier today, the Yen rose by 0.4% to 94.06 to the Dollar and by 0.4% to 120.27 against the Euro.

The Euro rose by 0.1% to $1.2786, still close to a four-month low versus the Dollar. Traders are still speculating on whether future European bailouts might be similar to the kind of bank deposit levies imposed on Cyprus.

Today Cypriot banks opened their doors to customers for the first time since the 16th of March, following the European Union having presented a plan which was to force losses on all depositors in exchange for a bailout. New rules are to be implemented that will curb access to cash.

Borrowing costs rose yesterday in Portugal, Spain and Italy. The Italian 10-year yield is at its highest relative to German bunds so far this year.

For many, the expectations are that these are the countries with the highest risk of deposit flight after the Cypriot crisis unfolded and speculation is already taking flight as to who is the next candidate to follow the Cypriot lead.

Italy particularly is under the microscope, as the nation is still without a government following recent inconclusive elections.
 
From the U.S., growth revised figures are due out today from the U.S. Commerce Department. These are expected to show that the U.S. economy has expanded at a 0.5% annual pace in the fourth quarter. This would be faster than the government's previous estimate of 0.1% growth.

Recently, there have been signs emerging that strong U.S. economic figures are resulting in gains in the currency. Should data continue to improve, further Dollar gains should result.