Week 25, 2013, further reading

by Dean Popplewell, OANDA
Week in FX Europe – EUR’s Kiss Of Death From Ben
by Dean Popplewell, OANDA

Week in FX Asia – Bank of Japan Dissapoints Markets with Inaction Yen Rises | OANDA Forex Blog


This week the Bank of Japan found out just how harsh and fickle a mistress the market can be. The BoJ was the darling of the market and the shining example of how a central bank should intervene. Tuesday Governor Haruhiko Kuroda and the Japanese currency suffered the brunt of the market’s criticism for their lack of action. The currency rose to 96 and has continued to rise as the week progressed. There were expectations that the BoJ would increase its monetary stimulus.

Comments from the influential Mr. Yen summed up the feeling around Prime Minister Shinzo Abe’s third arrow of reform. Eisuke Sakakibara is pessimistic given the proximity of elections. Abe can’t introduce new reforms until fall to avoid compromising the results of the elections. Abe’s bold statements and follow through by Kuroda was seen as the one-two punch needed to get Japan back on track, but the expectation was that they would not stop there.

Sakakibara does not expect reforms before or after the election and adds his voice to the critics of Abe’s third arrow of reform as the first arrow of BoJ intervention is lacking in long-lasting impact.

Next week Japan will continue to be part of a G8 meeting where there could be rumblings of currency intervention. Although with the current state of the Yen this is less likely as the weakening could be unsustainable. The G8 might have suspected this from the start. Industrial production indicators will be released as well as foreign investment which will give insight on how well Abenomics is working on the real economy and investment.


* AUD RBA Meeting’s Minutes
* GBP Core Consumer Price Index
* GBP BOE Inflation Letter
* USD Consumer Price Index
* GBP Bank of England Minutes
* USD Fed Interest Rate Decision
* USD FOMC Economic Projections
* USD Fed’s Monetary Policy Statement and press conference
* EUR Producer Price Index
* CHF SNB Interest Rate Decision
* BOE Bank of England Minutes
* CAD Bank of Canada Consumer Price Index

Week in FX Asia – Bank of Japan Dissapoints Markets with Inaction Yen Rises | OANDA Forex Blog

Week in FX Asia – Bank of Japan Doubles Bond Buying Weakens Yen


The Bank of Japan (BoJ) captured the attention of the foreign exchange world last week when it started to live up to the expectations of the market. After much anticipation, and lots of preceding rhetoric, Governor Haruhiko Kuroda announced the BoJ’s plan to double its bond buying efforts to reach the 2% inflation target in the allotted two-year window. It was his comments on Prime Minister Shinzo Abe’s inflation goals while still at the Asian Development Bank that might have won him the top job at the Japanese central bank. Earlier this week, the program kicked into gear and the JPY lost 4% versus the USD and 5% versus the GBP. The main beneficiaries have been Japan’s exporters and holders of Japanese stocks with the Nikkei Index reaching new highs on the value of the yen.

The decision has not been without its critics and some, such as George Soros, cautioned that the fall in the yen could be “an avalanche” that the BoJ could not stop if the Japanese people start to sell the currency. China and South Korea remain critical of the move, branding it a currency war before the Group of Twenty meeting last February. This week, the negative criticism persisted, but the words used were “monetary blackmail” instead of “currency war”. Those ugly words have not been uttered since the Group of Seven made it clear that as long as Japan’s monetary easing means are used for domestic aims, it does not imply unfair currency manipulation.


* CNY Real GDP
* AUD RBA Policy Meeting Minutes
* GBP Consumer Price Index
* EUR Euro-Zone Consumer Price Index
* EUR German ZEW Survey (Economic Sentiment)
* USD Consumer Price Index
* NZD Consumer Prices Index
* GBP Bank of England Minutes
* CAD Bank of Canada Rate Decision
* USD U.S. Federal Reserve Releases Beige Book
* CAD Consumer Price Index

Week in FX Asia – Bank of Japan Doubles Bond Buying Weakens Yen | OANDA Forex Blog

Week in FX Asia – Is Future Yen Weakness A Myth? | OANDA Forex Blog


Certainly a concern to the lemming bear Yen trades out there is that USD/JPY price action has very much disappointed after the BoJ leadership sailed through Japan’s parliament. Buying USD/JPY has been the “no brainer trade” to date, fueled by better than anticipated US fundamental data and supported by the expected reflation BoJ efforts next month. Even this week’s US Retail Sales and claims headline is supporting the dollar, more so now that US yields are on the move. One risk is that US yields could eventually undermine the “long-tooth” equity rally. Rumors of an unscheduled easing measure right after Kuroda takes office has taken the Yen in the direction Japanese PM Abe has pointed all along. Abe’s aide talk about 98-100.0 being “fair-value” levels should become self-fulfilling.

The Bank of Japan will be under new management from March 20th, which is widely expected to lead to the implementation of more aggressive monetary policy, perhaps as soon as April. It looks like this market wants to sit on their hands until then. There are market suggestions that an unscheduled Bank of Japan policy meeting may take place immediately after the new BoJ governor takes office on March 20th. This move would obviously allow time for BoJ staff to study “the practicalities of any new easing proposals before a final decision can be made at the scheduled meeting on April 3-4.” Until then USD/JPY can only do one thing and that’s stay relatively bid. One wonders now how much longer other Asian central banks can go without reacting to the weak Yen threat?

The loudest section of the forex market is trying to bully the masses into believing that holding the dollar is the best chance of a winning hand. More analysts are now expecting the ‘mighty’ buck to sharply outperform GBY, JPY and AUD and some of the other noted G10 members, thanks to higher US yields and an improved US balance sheet. But, where is domestic Japan? The Yen weakness started in September and gathered momentum mid-November when the full dollar bullish breakout above 81.0 occurred. Risk appetite was strong back in September due to Draghi’s OMT and also QE3 announcement and by November Shinzo Abe arrived on the scene and Abenomics began. To date this has been predominately an offshore currency move. Where is domestic Japan? The Japanese housewife has yet to be sold on the weak yen story. They are needed to fulfill PM Abe’s dream.


* AUD RBA Policy Meeting Minutes
* GBP Consumer Price Index
* EUR German ZEW Survey (Economic Sentiment)
* GBP U.K. Chancellor Osborne Presents 2013 Budget to Parliament
* EUR German Producer Prices
* GBP Bank of England Minutes
* GBP Jobless Claims Change
* USD Federal Open Market Committee Rate Decision
* NZD Gross Domestic Product

Week in FX Asia – Is Future Yen Weakness A Myth? | OANDA Forex Blog

Week in FX Asia – Abe’s Cohorts Will Stand In The Way Of A Rising Yen | OANDA Forex Blog


  • Yen Surges to Near 91 after Minister’s Comments
  • Higher Taxes and Mortgage Requirements Turn Off Deals in Singapore
  • Japan’s Deputy Economy Minister Endorses Yen at 100
  • Aussies Slow Inflation Brings The RBA In Play
  • India, World’s Largest Gold Buyer, Raises Import Taxes
  • Australian Consumer Prices Gain Less Than Forecasts
  • BOJ’s Impact on the Yen
  • Yen Rises for Third Day Before Price Data
  • Deferred Actions from BOJ put pressure on Abe’s Stimulus Package
  • Yen on The Prowl; AP delayed
  • BOJ Adopts Abe’s 2% Inflation Target
  • BOJ’s next move will be under the Microscope
  • Offshore Trading of Yuan has Estimated to have Doubled to $6 billion a day
  • Japanese Stimulus Seen Boosting Southeast Asia
  • Singapore Dollar Losing Luster to Higher Returns
  • No more cheap labor? China’s growth at risk
  • SEA currencies to gain against SGD in 2013

    Week in FX Asia – Abe’s Cohorts Will Stand In The Way Of A Rising Yen | OANDA Forex Blog