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Forex Flash: Mr. Kuroda as dovish as expected - Nomura

Nomura Strategist Yujiro Goto notes that BOJ governor candidate Mr. Kuroda today showed his dovishness at a confirmation hearing in the lower house.

He feels that Mr. Kuroda emphasised that the BoJ would do whatever it takes to end deflation. Additionally, he kept his critical stance on previous BOJ monetary policy as expected, by stating that the cooperation between the Bank and government has been not sufficient and that decisions to end quantitative easing in March 2006 and zero interest rate policy in August 2000 were clearly wrong in hindsight. Goto also adds that he also stated that he would aim to meet the inflation target in two years and that communication with the market would be important as there is limited room for lowering interest rates. These comments are not surprising from his previous remarks.

Goto continues to explain that Kuroda also suggested that he would consider the following policy options as possible tools: start buying longer-term JGBs, purchase a wider range of assets, an earlier start to open ended purchases, and revise the bank note rule. he also ruled out the possibility of foreign bond buying by the BoJ, as it is difficult under current international circumstances. At the same time, Goto writes, “he indicated currencies can depreciate if central banks ease monetary policy. These policy options are well expected by FX investors and thus, the impact of his speech was relatively muted.

Session Recap: USD consolidates as cautious mood persists

The dollar trades firmer overall, although major crosses remain confined to recent ranges as markets begin the week on a cautious mood, with stocks falling around the world. The euro remains virtually unchanged around 1.3000 while Italy's political uncertainty persists. GBP/USD managed to hold above the 1.5000 support despite weak UK construction PMI. Other majors are also steady around opening levels, with the main exception of the Aussie which fell to an 8-month low before recovering somewhat. Eurozone finance minister meet today to discuss a financial aid package for Cyprus and maturity extensions for Ireland and Portugal.
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Forex Flash: USD/CAD at highest level in nine months - BBH

Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman notes that the US dollar rose to CAD1.0340 early Friday, its highest level in nearly 9 months, but reversed lower and finished Friday on its lows.
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