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The Japanese Yen dropped sharply as the week started whist the Nikkei jumped over 300 points
in initial trading as a response to the Bank of Japan’s announcement last week continues.
Also, it's reported that the central bank could start buying as much as 1.2 Trillion
Yen in Japanese Government Bonds with a maturity of over five years this week as it rushes
to beat deflation. Responses to the Bank of Japan have been overwhelmingly positive. IMF
chief Lagarde said that the "monetary policies, including unconventional measures, have helped
prop up the advanced economies, and in turn, global growth," and hailed that "the reforms
just announced by the Bank of Japan are another welcome step in this direction." USD/JPY has
risen to as high as 99 for the first time since May 2009 today while EUR/JPY also finally
broke the near term resistance of 127.7 and GBP/JPY also jumped to as high as 151.69.
The Euro is mildly softer against other major currencies on news from Portugal: Where the
Portuguese PM said there will be reductions in operating expenses as the constitutional
court blocked a plan to suspend monthly payments to state workers and pensioners last week.
He also warned that the court ruling put Portugal in an increasingly “fragile" position in
the negotiation with the EU, ECB and IMF on extending the maturities of the bailout loans.
Bundesbank head Weidmann said over the weekend that "it is important to draw the lesson from
Cyprus that banks can be wound up" and that should help "limit uncertainty".
Latest CFTC data shows that on April 2nd, speculations were largely unchanged compared
to the prior week, except that there were some build up in Euro shorts. Euro net shorts
rose again to 65,700 contracts up from 49,100. Yen net shorts dropped slightly to 78,200
from 89,100 but that was before the Bank of Japan meeting. Sterling net shorts were basically
unchanged at 65,000, compared to the prior week's 66,600. Canadian dollar net shorts
were relatively unchanged at 64,500 versus the prior week's 62,500. Aussie net longs
were also relatively unchanged at 84,000, compared to the prior week's 85,500.
Looking ahead, today's calendar is rather light with Eurozone Sentix investor confidence
and German industrial production as the main focus. Meanwhile, China inflation data will
be watched on Tuesday which could drive risk markets in Asia. Federal Open Market Committee
Meeting minutes will be the focus on Wednesday and attention will be on any discussion about
a stimulus exit. The Aussie will face some challenges from employment data on Thursday.
And US retail sales and Eurogroup meetings will be the main focus on Friday. The Dollar
has had a positive correlation with US stocks recently and last week's weak ISM indices
and Non Farm Payroll, put pressure on both. As a result Economic data from the US will
possibly start to have a larger impact on the markets ahead.