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Forex Flash: Dollar still supported after Bernanke speech - BTMU

Derek Halpenny of the Bank of Tokyo Mitsubishi UFJ notes that the dollar has been broadly stable versus the Yen and other Asian currencies after the semi-annual testimony from Chairman Bernanke was perceived as balance with him offering a strong defense of QE, but also reassuring the Senate Banking Committee that the Fed is in control and can reverse course at any point.

He sees that USD/JPY has also remained stable given the lack of news from Japan regarding BoJ nominations and the LDP has proposed a vote on the nominations on 14th March in the Lower House and the 15th in the Upper House after the names are formally presented to the houses of the Diet tomorrow. He writes, “Haruhiko Kuroda appears to be a shoe-in with indications that the DPJ may even largely support his nomination. Kikuo Iwata may well prove more problematic given his more radical views – like changing the BOJ Law and firing the Governor if the 2.0% target is not met by a two-year time limit.” However, Halpenny feels that even if the DPJ doesn’t back Iwata, Your Party have indicated support suggesting that even Iwata is likely to gain the required support in the Upper House. Hiroshi Nakaso, being a BOJ official will get wide support.

Further, Halpenny notes that another positive development for the Abe administration was the success in getting the 2012 supplementary budget passed in the Upper House yesterday. The vote in favour of the bill was 117 vs 116. He adds that the DPJ opposed the bill but the LDP managed to garner the support of nearly every other party in the Upper House – a sign perhaps that the potential gridlock in the Upper House may be easing due to the wide popularity of the Abe administration. he finishes by writing, “Parties may not wish to be seen scuppering policy changes that have lifted investor confidence ahead of the Upper House elections this summer. Yen upside risks will persist over the short-term until euro sentiment improves after the initial Italian election shock.”

Forex Flash: Bernanke testimony likely to mirror previous one – UBS

Elsewhere, Fed Chairman Bernanke mostly brushed aside concerns about the unintended consequences of QE3 implying there is little urgency in cutting the program short before the labor market improves substantially. Bernanke gives testimony again today, but his prepared opening statement is likely to be identical to Tuesday's with only politicians' questions offering scope for significant variation during Q&A.
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