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Forex Flash: FX stability ahead of key central bank meetings – BTMU

Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that the dollar has traded in a 40-pip range versus the yen during the Asian trading session with little to drive the currency pair either way.

Elsewhere, he notes that Japanese Finance Minister Aso is again pushing the Tokyo line today by stressing in the Diet that aggressive monetary easing by the BOJ is not akin to competitive Yen devaluation, adding that yen weakness was the result of BOJ monetary easing. He writes, “We would refine that somewhat to say yen weakness is in part due to BOJ monetary easing and in part due to expectations of further easing ahead and more aggressive action by the government to boost economic growth.”

He feels that these expectations are high and hence there remains some scope for disappointment. Still, Tokyo will take heart from the apparent backing from the IMF. Yesterday, Deputy Managing Director Lipton stated that Japan was doing the right thing to tackle deflation. With IMF support for Abe’s policies, complaint from abroad over yen weakness will not have the same impact.

Halpenny sees that the BOJ nominations are key now, with Toshiro Muto, Kazumasa Iwata and Haruhiko Kuroda the three names mentioned frequently as the favourites. Toshiro Muto is possibly the most cited and his nomination is very much dependent on whether the LDP can muster the support in the Upper House for a candidate that was rejected in 2008. Kazumasa Iwata would in all likelihood trigger the greatest market reaction (yen selling) given his vocal support of foreign bond buying. However, he suspect that his stance on this may well be toned down now given USD/JPY is now approaching the 95.00 level.

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Kit Juckes, Global Head of Currency Strategy at Societe Generale notes that the ECB and MPC meet today, but he suspects that policy changes are not the main focus.
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Forex Flash: G/ lower ahead of Central Bank meets – OCBC Bank

Emmanuel Ng of OCBC Bank notes that G7 currencies are lower against the dollar ahead of the ECB and BoE meets this morning.
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