The pair is likely to drift sideways today in Tokyo, with investors focusing on the outcome of the two-day policy board meeting by the Bank of Japan. The consensus view in the market is that the BOJ would sign a joint statement with the government to deal with the prolonged deflation and introduce a 2% inflation target, while boosting the asset-buying program further from Y101 trillion. If the BOJ fails to take more aggressive action than these measures, the pair is likely to turn hostage to the consolidation risk in a typical buy on rumour and sell on fact play. If that happens, immediate focus would be whether the greenback can protect the 5-day moving average at Y89.36 and the 21-day moving average at 87.64. But mid-term sentiment toward the yen will remain bearish as the government is expected to appoint somebody who is willing to take aggressive monetary action as new BOJ government, replacing Masaaki Shirakawa, whose’ term will end in April. The rate moved from Y89.34 to Y90.25 on Monday. The yen declined to Y90.25 against the dollar on Monday, the weakest level since June, 2010, while dropping to Y120.71 against the dollar on Friday, the weakest since May, 2011.
EasyForexNews Research Team