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Forex Flash: USD/JPY buying rational runs deep – UBS

FXstreet.com (Barcelona) - Investors have bought the USD/JPY this year for many reasons. “However, the prospect of the Bank of Japan hitting its new 2% inflation target within two years is one of those reasons – luckily it is not the only one, because generating and then sustaining a 2% inflation rate in Japan seems challenging to say the least.” Notes Research Analyst Gareth Berry at UBS. Even Prime Minister Abe who initially championed the cause conceded yesterday that the target might not be reached at all.

Peering into the components of the CPI basket we can see why. To maximize chances of success, somehow the BoJ needs to focus its efforts on those categories in particular.

The yen's sharp decline against the dollar since November will help here. 'Imported inflation' on the back of sudden currency weakness should be enough to generate an inflationary pulse. We can already see the first signs of this as gasoline prices are up 6.4% since parliamentary elections were called in November, and prices now approaching a 12-month high.

Forex Flash: Risk propensity mitigated as NZD/USD soars – BNZ

The fallout surrounding risk was relatively limited across currency markets – indicative of such, the VIX index (a proxy for risk aversion), after briefly spiking to 19%, eased back to its recent lows around 12% by the end of the month. And despite the odd Europe-inspired hiccup, the US S&P500 index notched up another 3.6% increase in March, bringing the year-to-date gains to 10%.
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Forex: USD/CAD extending the decline, around 1.0130

The Canadian dollar continues to strengthen against the greenback, dragging the cross to fresh 6-week lows in the boundaries of 1.0130 from 8-month highs at the beginning of March around 1.0350...
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