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26 Apr 2013
Forex Flash: US dollar gives back some of its recent gains - BTMU
FXstreet.com (Barcelona) - Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that the Yen has strengthened in response to the unchanged monetary policy decision from the BOJ.
He sees that the announcement, which came at 0535 BST, resulted in USD/JPY falling back below the 99.00 level and the announcement from the Bank incorporates simply a one-line statement committing to increasing the monetary base at an annual rate of about JPY 60-70 tln. Further, he notes that the BoJ has also released its semi-annual report on the Outlook for the Economy and Prices and this incorporates the annual CPI forecasts and it expects an annual CPI rate, excluding the consumption tax hike impact, to be 1.4% in FY2014 and 1.9% in FY2015.
Further, he notes that the report itself does then indicate that the price stability target would be reached “toward the latter half of the projected period”. he writes, “If we want to scrutinize this relative to expectations – why not! – then we could argue that maybe the BOJ’s expectations of reaching the 2% target is a little later than expected.” Further, he sees that the Nikkei reported that the BOJ would signal reaching the target by the “spring of 2015” but the BOJ is looking more toward the “latter half of the projected period”. The real GDP forecasts are also higher with the BOJ expecting growth of 2.9% and 1.4% this fiscal year and next. Halpenny thinks if there is anything to take from today’s BOJ policy meeting it is the fact that the BOJ believes it has made all the announcements necessary in order to achieve its more aggressive inflation target.
He feels that may illicit the market questioning what next for USD/JPY and how will we breach the 100.00 level and keep the momentum going? There are certain minor aspects of policy adjustment still remaining for the BOJ – cutting the interest rate paid on reserves is one – but that will only likely be implemented if there is further volatility in the JGB market. So he feels that for the next catalyst for USD/JPY moving higher it may well have to come from abroad and clearly, the US economy is key. He finishes by writing, “We do expect USD/JPY to move higher but much of the story going forward from here relates to the US economy strengthening again and the FOMC moving to taper QE3 by around year-end. The FOMC meeting next week is of course too early to expect any shift in policy.”
He sees that the announcement, which came at 0535 BST, resulted in USD/JPY falling back below the 99.00 level and the announcement from the Bank incorporates simply a one-line statement committing to increasing the monetary base at an annual rate of about JPY 60-70 tln. Further, he notes that the BoJ has also released its semi-annual report on the Outlook for the Economy and Prices and this incorporates the annual CPI forecasts and it expects an annual CPI rate, excluding the consumption tax hike impact, to be 1.4% in FY2014 and 1.9% in FY2015.
Further, he notes that the report itself does then indicate that the price stability target would be reached “toward the latter half of the projected period”. he writes, “If we want to scrutinize this relative to expectations – why not! – then we could argue that maybe the BOJ’s expectations of reaching the 2% target is a little later than expected.” Further, he sees that the Nikkei reported that the BOJ would signal reaching the target by the “spring of 2015” but the BOJ is looking more toward the “latter half of the projected period”. The real GDP forecasts are also higher with the BOJ expecting growth of 2.9% and 1.4% this fiscal year and next. Halpenny thinks if there is anything to take from today’s BOJ policy meeting it is the fact that the BOJ believes it has made all the announcements necessary in order to achieve its more aggressive inflation target.
He feels that may illicit the market questioning what next for USD/JPY and how will we breach the 100.00 level and keep the momentum going? There are certain minor aspects of policy adjustment still remaining for the BOJ – cutting the interest rate paid on reserves is one – but that will only likely be implemented if there is further volatility in the JGB market. So he feels that for the next catalyst for USD/JPY moving higher it may well have to come from abroad and clearly, the US economy is key. He finishes by writing, “We do expect USD/JPY to move higher but much of the story going forward from here relates to the US economy strengthening again and the FOMC moving to taper QE3 by around year-end. The FOMC meeting next week is of course too early to expect any shift in policy.”