USDJPY Still Firm
Fed Chair Bernanke sounded downbeat on the state of the US housing market overnight. He said that a weak housing market represents a ‘powerful headwind to recovery’, and that a revival of the sector faces significant obstacles. He offered little in the way of fresh guidance, but will have another opportunity to do so when he appears at the Economic Club in New York on Nov 20. USDJPY meanwhile topped out at 81.46 following a strong rally for much of the past 24 hours after the leader of Japan’s main opposition party again expressed a preference for a weaker yen, to be achieved via much looser BoJ monetary policy. We’ve heard such remarks before, but Abe’s views on economic policy have acquired a greater resonance since Prime Minister Noda set a date for the general election earlier this week. Parliament is due to be dissolved today in preparation for the election on Dec 16th. The campaign itself offers plenty of scope for politicians of all stripes to sound increasingly tough on the BoJ, and that is one reason why we are reluctant to stand in the way of this yen weakness for a few days at least. The BoJ’s policy decision due on Tuesday is another reason. And it did not escape our attention that a surge in US jobless claims last night failed to trigger a USDJPY reversal – suggesting the underlying bid tone is solid for now. Jobless claims rose sharply to 439k (cons. 375k), although Hurricane Sandy was very likely to blame. The focus now will be on how quickly claims decline again and resume their downward trend. Today, US industrial production dominates the data calendar.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank