Yen Nudging Higher
USDJPY inched lower overnight amid anticipation that Japanese life assurance companies will repatriate ahead of fiscal mid-year-end on Sept 30. The Australian Finance Review published yet another bearish article on the Australian dollar, helping to apply some downward pressure on AUDUSD. Der Spiegel reported over the weekend that there are plans to leverage up the ESM to give it an effective lending capacity of EUR 2 trn. The euro was entirely indifferent to the article however, which is not surprising given the same idea was floated twelve-months ago before being quietly abandoned. Returning to Japan, the BoJ minutes from the Aug 8-9 policy meeting showed that one of the nine board members suggested the bank should consider “exerting influence on foreign exchange rates” in a bid to redouble efforts to boost inflation expectations. Although the yen did not react to the headline, it does indicate the board’s ability to dream up new policy initiatives has not yet been exhausted. Deputy Governor Yamaguchi set the record straight in an overnight speech though, stressing that the BoJ has no intention of influencing FX rates. Again, no reaction. This week will see the Spanish government presenting the 2013 budget to parliament on Thursday and releasing the results of bank stress tests on Friday, but the euro is unlikely to be greatly affected by either event. A Greek Finance Ministry official refuted a Der Spiegel report that put Greece’s budget gap at EUR20 bn, noting that the gap is currently EUR13.5 bn. The Troika committee, meanwhile, left Athens to take a “brief pause” and return in a week’s time. In the US, Atlanta Fed President Lockhart reiterated his support of the Fed’s QE program, adding that more easing may be needed if jobs growth is still sluggish. Data releases are limited ahead today, putting the focus on the German IFO report for September.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank