BOJ Sparks Fizzle Out, Spanish Bond Auction Up Next

The Japanese Yen blasted off against the US Dollar during early trading on Thursday, after reaction to the Bank of Japan's monetary easing fizzled out.

Meanwhile, investors are waiting to see if Spain will seek a bailout and kick-start the European Central Bank's bond-buying programme. Another key near-term focal point is an auction of Spanish bonds scheduled to take place today.
PMI Data anticipation keeps Euro down
Data is due out today which is expected to show that European services and manufacturing have contracted. This would add to evidence that the region's debt crisis is stunting growth. Ahead of the data, the Euro fell against both the Dollar and Yen
Most economists are expecting that a Euro zone composite index for services and manufacturing industries in September, due for release by London-based Markit Economics today, was below 50, signalling contraction.

If this turns out to be the case, then I foresee that the European economy will worsen before getting any better.

Also on the agenda today is an auction by Spain, the fourth largest economy in the Euro bloc, of its 3 and 10 year notes.

Since the European Central Bank (ECB) unveiled a limitless bond purchase program on the 6th of September, which was aimed at lowering government borrowing costs, Spain's benchmark 10 year yield has dropped to 5.7% from an Euro-era record of 7.75% in July.

Spain could consider a bailout if it determines that the conditions imposed are acceptable, according to Deputy Prime Minister Soraya Saenz de Santamaria.

Should we see a poor auction result today, ironically this may be positive for the Euro as it would incentivise Spain to ask for assistance sooner than it might otherwise have planned.

Earlier today the Euro dipped 0.8% to 101.5 Yen and was down 0.4% to $1.2995. The Yen rose 0.3% to 78.13 per Dollar.

The Yen has risen against all of its 16 major peers. This is mainly as a result of speculation that the recent unexpected expansion of monetary stimulus by the Bank of Japan (BOJ) might do little to spur economic growth. This could be true I think, in light of a current territorial dispute with China and general weak global demand which impacts negatively on exports.

Japan's Finance Ministry announced earlier today, that its trade deficit has widened to 754.1 billion Yen in August.

The Aussie came under pressure, after a private survey has shown that China's manufacturing may shrink for an 11th successive month. This has dimmed prospects for China's exports and, as China is Australia's largest trade partner, the outlook reflects negatively on the Aussie.

The Aussie earlier was down 0.7% at $1.0403.