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Forex Flash: Kuroda comments have little impact upon the yen - BTMU

Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that Yen strengthened modestly overnight as comments from new BoJ Governor nominee Kuroda have only had a limited impact on the currency.

He feels that the limited market reaction is in part a reflection that the speculative market had likely already sold the yen on Friday in anticipation of dovish comments from Kuroda today at his parliamentary confirmation hearing. Nevertheless, Kuroda pledged to do “whatever it takes to end deflation... as soon as possible.” if chosen to be the next BoJ Governor. Further, Kuroda importantly stated that it would be “good to achieve 2% inflation within two years.”

Given that the BoJ currently projects that it will fall well short of meeting that goal, Hardman feels that it highlights that Koruda will have to significantly expand monetary easing further still in order to credibly aim to achieve that goal. He writes, “In doing so he criticized the BoJ’s efforts so far which have failed to defeat deflation stressing that they haven’t “bought enough assets to end deflation”. “

When covering further asset purchases, Kuroda stated that he “needs to consider the effects of buying risk assets.”, and that it is “natural to buy longer term bonds”, and he will “consider starting open ended asst purchases earlier.” However, he confirmed that it is “difficult for the BoJ to purchase foreign assets” reinforcing our view that they remain an unlikely policy option for now. When speaking about the yen, he clarified that BoJ easing “isn’t aimed at weakening the yen” although sees a “possible effect upon the yen amid BoJ easing”. He also stressed that ending deflation in Japan will be good for
the global economy.

Hardman feels that his comments are likely intended to help ease international concerns that the BoJ will directly pursue a weaker Yen under his leadership and overall, he suspects that Kuroda´s comments offered little fresh insight, supporting expectations that the BoJ under his leadership will pursue more aggressive easing through buying a wider range of risk assets and longer-dated JGBs
although being unwilling to monetize government debt.

Elsewhere, he notes that the Yen also gained support overnight from more risk averse trading conditions as investor concerns over a near term economic slowdown in China build. He writes, “The non-manufacturing China PMI for February released over the weekend signaled that activity likely expanded at its lowest pace since September. The Chinese equity market has also fallen sharply overnight following speculation about new policy measures to dampen property prices. The recent less favorable news flow from China has resulted in the Australian dollar declining to its lowest level since mid-July of last year against the US dollar.”

Forex Flash: Yen indifferent to global developments - BBH

Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman notes that the heightened political tensions in Europe and the decline in US yields has not been sufficient to lift the yen.
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Forex: USD/JPY pares losses to 93.61/62

The USD/JPY has pared the majority of its losses after falling to the 93.28 region (session low) during overnight trading. However, after sporadic trading in the doldrums, the pair has recently recovered and moved back to opening levels, threatening to break into positive territory. The cross is presently operating at the 93.61/62 level in these moments, whilst still incurring a modest loss of -0.04% during European trading.
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