Japan Warns (Again) On FX
USDJPY spent the entire Asia session sub-78.00, prompting Finance Minister Azumi to warn he stands ready to deal with speculative FX moves as long as he is in office. The comments come in the wake of media reports of a potential cabinet reshuffle over the coming days which could see Azumi replaced as finance minister. In the interim, Azumi is evidently keen to counter perceptions of a vacuum in the decision-making process for FX intervention. He also seemed eager to challenge the view that BoJ easing is now the preferred method for inducing yen weakness, stressing that monetary policy can only impact the yen over the long term. Despite this innovative rhetorical flurry USDJPY remained heavy with Japan’s semi-year-end only days away. San Francisco Fed President Williams explained why the Fed chose a bond buying worth only $40 bn per month – he said the intention was to maximize the size without creating market dysfunction. However he went on to say that the Fed will weigh its options again in December to decide if more easing is required. Our US economics team expects the Twist programme will be replaced at year-end with an additional $45 bn of outright purchases of US Treasurys. Today, ECB President Draghi, SNB President Jordan, and US Treasury Secretary Geithner are due to speak. Also on tap are the July retail sales report in Canada, July S&P/Case Shiller home price index, and September consumer confidence index in the US.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank