Yen seen as only source of real volatility

The news of an emergency Yen meeting in Japan on Monday was enough to get markets moving at the start of Asian trade with a risk on approach taken on the expectation that the Bank of Japan would introduce new measures to stimulate the economy and curb the strength in the local currency.

The news of an emergency Yen meeting in Japan on Monday was enough to get markets moving at the start of Asian trade with a risk on approach taken on the expectation that the Bank of Japan would introduce new measures to stimulate the economy and curb the strength in the local currency. While the major currencies only really jumped out to marginal gains on the Asian open, the commodity bloc showed some impressive early gains on the back of this news with Aussie, Kiwi and Cad all tripping some stops to help accelerate gains.

Relative Performance versus USD Monday (As of 11:00GMT)

  1. YEN+0.67%
  2. STERLING+0.12%
  3. CAD+0.09%
  4. AUSSIE-0.11%
  5. SWISSIE-0.13%
  6. KIWI-0.18%
  7. EURO-0.48%

However, in the end, the policy meeting proved to be a letdown, with the central bank still seemingly not too concerned with the need to fight against severe deflationary threats and a rapid appreciation in the Yen. The BoJ lifted the amount of funds available for the second time under the fixed rate facility that was set up last December, while also lengthening the maturity from 3 months to 6 months. The immediate fallout from this action was risk negative and Yen positive, with the Yen rallying and commodity currencies selling off quite sharply as a result of the unimpressive central bank moves.

Elsewhere, data released in Asia was not risk supportive with Kiwi trade coming in wider, Aussie inventories softer, and UK Hometrack housing weaker than previous readings. Meanwhile, in European trade, Eurozone confidence numbers were broadly in line with expectation, while Norwegian retail sales were significantly stronger. On the whole, a very light day of trade thus far, with the UK bank holiday contributing to the lackluster trade. With the exception of the Yen, most currencies have been fairly stable.

Looking ahead, things could pick up a bit in North American trade with Canada current account (-$10B expected), industrial product prices (0.4% expected) and raw materials prices (0.2% expected) all due at 12:30GMT. Also out at 12:30GMT are US personal consumption (0.1% expected), personal income (0.3% expected), and personal spending (0.3% expected). Dallas Fed manufacturing (-16% expected) is then due at 14:30GMT. On the official circuit, Fed Bullard is slated to speak in St. Louis at 17:30GMT. US equity futures point to a mildly bid open, while both oil and gold are tracking slightly lower by some 0.35% and 0.10% respectively.

GRAPHIC REWIND

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