Nothing New From Kuroda
USDJPY failed to hold the 95.00 level overnight in the wake of BoJ Governor Kuroda’s press conference, which was largely a restatement of his previous parliamentary testimony. He gave no commitment to hold an extraordinary policy meeting before April 3 – 4, although we note he did not rule out the possibility entirely either. With less than two weeks to go, investor patience will likely be rewarded in our view, and we see this shallow pullback as a buying opportunity before USDJPY likely trades higher to 100 by year-end. Elsewhere, in Cyprus, behind the scenes efforts continue in a bid to design a new bailout proposal. The sense of urgency increased on Thursday after the ECB made it known publicly that the Cypriot banking system can no longer count on the continued availability of ELA liquidity after Monday – unless a bailout framework is in place by then. Already the Central Bank of Cyprus has suggested that plans are afoot to restructure key parts of the banking system and perhaps adopt a good bank/bad bank model. Also, press reports indicate that the issue of a new government bond backed by state assets could be under consideration. The apparent intention is to find a formula that exempts deposits of less than EUR 100k from any losses, and at the same time persuades the ECB not to lower or withdraw liquidity provision to the banking system. Eurozone finance ministers held another teleconference call on Thursday night and the subsequent statement reinforced the message that the ball is now in Cyrpus’ court: “The Eurogroup stands ready to discuss with the Cypriot authorities a draft new proposal, which it expects the Cyprus authorities to present as rapidly as possible.”
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UBS Investment Bank