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Forex Flash: Hope of policy reversal in Cyprus calms market - BTMU

FXstreet.com (Barcelona) - Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that for most of the Asian trading session there has been a growing belief that the Cypriot authorities would likely reverse the decision to ‘tax’ deposit holders with less than 100k.

He believes that the realisation that a grave mistake had been made in undermining the deposit protection schemes that exist throughout the entire euro-zone helped restore some market stability yesterday and throughout the Asian trading session today. The Sensex index is the exception to this restored improvement in confidence after the RBI hinted after cutting rates again that further room for easing was “limited” due to inflation. Furthermore, he notes that a key coalition ally has just withdrawn support for the government due to demands over Sri Lankan human rights and the Sensex is currently 1.0% lower.

Elsewhere, there was little news from Japan other than it being Governor Shirakawa’s last day at the BOJ and he has given his final press conference prior to the new leadership team under Haruhiko Kuroda starting tomorrow. Halpenny feels that key y for near-term direction for the yen is the tone Kuroda’s initial comments and we may well get a strong signal of determination to try and achieve the 2% target level within a 2-year timeframe which could give USD/JPY a lift. He writes, “The performance of the yen yesterday is telling – after a sharp gain in response to the Cyprus announcement, the yen reversed all of these gains and is now weaker still today.” Ultimately, until we get the first steps from Kuroda, he believes that the yen is likely to remain under downward pressure.

Forex: EUR/JPY retraces daily gains up to 124.13 high

After testing the opening price and going as low as 123.16 as the European session opened, the EUR/JPY is trading at 123.50 after the release of Italian Industrial Output. The cross has retraced its Asian gains up to 124.13 high.
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Forex Flash: CAD - Foreigners are in search of yields - Nomura

Nomura economist Charles St-Arnaud notes that non-residents increased their holdings of Canadian securities by C$13.3bn in December, following a decline of C$1.9bn in December.
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