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15 Mar 2013
Forex Flash: US dollar losing momentum - BTMU
FXstreet.com (Barcelona) - Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that yesterday, the dollar reversed some of its recent strength against the Euro and the pound in particular but managed to remain very stable versus the yen.
He sees that the news from Asia is limited with currency performance versus the dollar mixed. He feels that the fact that USD/CNY continues to slowly drift lower should limit the upside for the dollar versus other Asian currencies. In terms of the yen, the only news of note has been the confirmation in the Upper House of Kuroda, Iwata and Nakaso to the three key positions on the monetary policy board of the BOJ.
He adds that the focus now will immediately shift to the upcoming monetary policy meetings in order to determine just how aggressive the new BOJ will be. The first scheduled monetary policy announcement will be on 4th April with the second on 26th April and there may well be speculation in the market of an un-scheduled meeting between now and the first scheduled meeting but I’m not sure the time distance to that first scheduled meeting is long enough for that to make much sense.
He writes, “Our view is unchanged – we suspect yen weakness can carry on over the coming weeks into the first meeting, possibly through the second meeting but beyond then we expect the yen to correct stronger. Our three month USD/JPY forecast is currently 92.00. With little sign of any major shift in risk appetite amongst Japanese households and with Life Insurance Companies more likely to reduce hedging ratios only gradually by buying on dips, we suspect USD/JPY will find it difficult to sustain these levels once the BOJ takes its first, as expected, monetary steps. Watch for an announcement by PM Abe that Japan will join TPP (Trans Pacific Partnership) discussions, a trade pact with the US and others. It would be a sign that the Abe administration is serious about reform, even if certain steps might go against its core vote (farmers). “
He sees that the news from Asia is limited with currency performance versus the dollar mixed. He feels that the fact that USD/CNY continues to slowly drift lower should limit the upside for the dollar versus other Asian currencies. In terms of the yen, the only news of note has been the confirmation in the Upper House of Kuroda, Iwata and Nakaso to the three key positions on the monetary policy board of the BOJ.
He adds that the focus now will immediately shift to the upcoming monetary policy meetings in order to determine just how aggressive the new BOJ will be. The first scheduled monetary policy announcement will be on 4th April with the second on 26th April and there may well be speculation in the market of an un-scheduled meeting between now and the first scheduled meeting but I’m not sure the time distance to that first scheduled meeting is long enough for that to make much sense.
He writes, “Our view is unchanged – we suspect yen weakness can carry on over the coming weeks into the first meeting, possibly through the second meeting but beyond then we expect the yen to correct stronger. Our three month USD/JPY forecast is currently 92.00. With little sign of any major shift in risk appetite amongst Japanese households and with Life Insurance Companies more likely to reduce hedging ratios only gradually by buying on dips, we suspect USD/JPY will find it difficult to sustain these levels once the BOJ takes its first, as expected, monetary steps. Watch for an announcement by PM Abe that Japan will join TPP (Trans Pacific Partnership) discussions, a trade pact with the US and others. It would be a sign that the Abe administration is serious about reform, even if certain steps might go against its core vote (farmers). “