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Market Review - 11/06/2013 21:58GMT
Yen rallies after BoJ disappoints with no new stimulus measures
The Japanese yen rose strongly against other currencies on Tuesday as the Bank of Japan refrained to introduce any additional measures to curb recent volatile moves in Japanese bond yields and to weaken its currency, causing a selloff in the Nikkei futures in Europe and New York session.
Versus the Japanese yen, the greenback edged lower from Australian high at 99.05 and then nose-dived to 97.79 after the announcement of BOJ's rate decision, which stated that BOJ board member Kiuchi proposed making 2% inflation target a medium- to long-term goal, not BOJ's current commitment to hit its inflation target within two years. Later, despite dollar's brief recovery to 98.47 in European morning, the pair tumbled to 96.49 due to the steep fall in Nikkei future and dropped further to session low of 95.59 in U.S. afternoon due to dollar's broad-based weakness and a near 400-point decline in the Nikkei futures.
The Bank of Japan kept monetary policy steady by unanimous vote, pledging to increase monetary base at annual pace of 60-70 trillion yen. BOJ said 'firmness in domestic demand is increasing due to monetary, economic policy steps; overseas economic growth is slow but expected to pick up pace; Japan's economy is expected to remain on mild recovery path.'
Earlier in European morning, usd/jpy was pressured due to the comments from the BOJ governor Kuroda who said in the press conference that 'markets likely to stabilize over time, reflecting recovery in economy; do not see much room to sharply boost buying of J-REITs in short term; BOJ's year-end forecast of its J-REIT holding not necessarily a ceiling for it purchases; will continue efforts to curb volatility in JGB market; would consider extending fixed-rate OPS in the future if needed.'
Although the single currency ratcheted higher from Asian low at 1.3248 to 1.3299 in European morning, price fell below said 1.3248 to 1.3232 in New York morning after dovish comments by ECB's Mersch, who said 'setting formal limit to ECB bond-buy programme would reduce market trust in programme.' However, the pair penetrated last Thursday's high at 1.3306 to a 3-1/2 month top at 1.3316 due to comments from ECB's Asmussen before retreating but dollar's broad-based weakness pushed the pair to 1.3318 in late U.S. trading.
ECB board member Joerg Asmussen told German constitutional court the ECB bond-buying scheme needed to be unlimited to show ECB serious about defending price stability; OMT programme is de facto limited by focus on short term maturities; ECB would react if states for instance shifted all their debt issuance of short maturities; does not expect debt haircut for any euro zone country.'
The British pound edged lower from Asian top at 1.5602 to 1.5521 in New York morning due to cross selling of sterling versus other currencies. However, dollar's broad-based weakness pushed the pair to a high of 1.5647 in New York morning before retreating but renewed buying interest emerged at 1.5570 and lifted the pair, cable later climbed to session high of 1.5653 near New York close.
In other news, German constitutional court president Vosskuhle said 'success of ECB's measures plays no role in deciding whether they constitutional.' German Finance Minister Schaeuble told constitutional court that he did not see ECB bond-buying violating its mandate. Bundesbank's Weidmann said 'sees risk OMT could slow euro zone reform effort and reduce ECB's credibility; it would be problematic to mutualise solvency risk of euro zone states via monetary policy.'
On the data front, U.K. industrial production in April came in at 0.1% m/m and -0.6% y/y, better than the forecast of 0.0% and 0.7% respectively. U.K. manufacturing production in April came in at -0.2% m/m and -0.5% y/y, versus the expectation of -0.3% and -0.4% respectively.
Data to be released on Wednesday :
Australia Westpac consumer confidence, Japan domestic CGPI, Machinery orders, Germany CPI, HICP, France current account, CPI, HICP, Italy CPI, HICP, U.K. claimant count, average earnings, unemployment rate, euro zone industrial production, U.S Federal Budget on Wednesday. Hong Kong and China are closed for market holiday.
Yen rallies after BoJ disappoints with no new stimulus measures
The Japanese yen rose strongly against other currencies on Tuesday as the Bank of Japan refrained to introduce any additional measures to curb recent volatile moves in Japanese bond yields and to weaken its currency, causing a selloff in the Nikkei futures in Europe and New York session.
Versus the Japanese yen, the greenback edged lower from Australian high at 99.05 and then nose-dived to 97.79 after the announcement of BOJ's rate decision, which stated that BOJ board member Kiuchi proposed making 2% inflation target a medium- to long-term goal, not BOJ's current commitment to hit its inflation target within two years. Later, despite dollar's brief recovery to 98.47 in European morning, the pair tumbled to 96.49 due to the steep fall in Nikkei future and dropped further to session low of 95.59 in U.S. afternoon due to dollar's broad-based weakness and a near 400-point decline in the Nikkei futures.
The Bank of Japan kept monetary policy steady by unanimous vote, pledging to increase monetary base at annual pace of 60-70 trillion yen. BOJ said 'firmness in domestic demand is increasing due to monetary, economic policy steps; overseas economic growth is slow but expected to pick up pace; Japan's economy is expected to remain on mild recovery path.'
Earlier in European morning, usd/jpy was pressured due to the comments from the BOJ governor Kuroda who said in the press conference that 'markets likely to stabilize over time, reflecting recovery in economy; do not see much room to sharply boost buying of J-REITs in short term; BOJ's year-end forecast of its J-REIT holding not necessarily a ceiling for it purchases; will continue efforts to curb volatility in JGB market; would consider extending fixed-rate OPS in the future if needed.'
Although the single currency ratcheted higher from Asian low at 1.3248 to 1.3299 in European morning, price fell below said 1.3248 to 1.3232 in New York morning after dovish comments by ECB's Mersch, who said 'setting formal limit to ECB bond-buy programme would reduce market trust in programme.' However, the pair penetrated last Thursday's high at 1.3306 to a 3-1/2 month top at 1.3316 due to comments from ECB's Asmussen before retreating but dollar's broad-based weakness pushed the pair to 1.3318 in late U.S. trading.
ECB board member Joerg Asmussen told German constitutional court the ECB bond-buying scheme needed to be unlimited to show ECB serious about defending price stability; OMT programme is de facto limited by focus on short term maturities; ECB would react if states for instance shifted all their debt issuance of short maturities; does not expect debt haircut for any euro zone country.'
The British pound edged lower from Asian top at 1.5602 to 1.5521 in New York morning due to cross selling of sterling versus other currencies. However, dollar's broad-based weakness pushed the pair to a high of 1.5647 in New York morning before retreating but renewed buying interest emerged at 1.5570 and lifted the pair, cable later climbed to session high of 1.5653 near New York close.
In other news, German constitutional court president Vosskuhle said 'success of ECB's measures plays no role in deciding whether they constitutional.' German Finance Minister Schaeuble told constitutional court that he did not see ECB bond-buying violating its mandate. Bundesbank's Weidmann said 'sees risk OMT could slow euro zone reform effort and reduce ECB's credibility; it would be problematic to mutualise solvency risk of euro zone states via monetary policy.'
On the data front, U.K. industrial production in April came in at 0.1% m/m and -0.6% y/y, better than the forecast of 0.0% and 0.7% respectively. U.K. manufacturing production in April came in at -0.2% m/m and -0.5% y/y, versus the expectation of -0.3% and -0.4% respectively.
Data to be released on Wednesday :
Australia Westpac consumer confidence, Japan domestic CGPI, Machinery orders, Germany CPI, HICP, France current account, CPI, HICP, Italy CPI, HICP, U.K. claimant count, average earnings, unemployment rate, euro zone industrial production, U.S Federal Budget on Wednesday. Hong Kong and China are closed for market holiday.
