Yen plunges – Euro jumps

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EURO/USD started the week in Asia with impressing gains trading at 1.3368 while Japanese Yen continues to plunge. USD/JPY plunged to its lowest level in two-and-a-half-year at 89,58 with focus on the Central Bank of Japan’s (BOJ)promise to deliver bold stimulus. Prime Minister Shinzo Abe said Sunday that BOJ must set a 2 percent inflation target and show markets it was determined to pursue tough monetary easing to end decades of deflation. A public poll shows that Abe has strong support for his efforts to encourage economic growth.
The Euro reached a four month high against the dollar at 1.3404 in early Asian trade. The Euro continues to outperform greenback after European Central Bank (ECB) president, Mario Draghi, last Thursday gave no indication that the ECB would ease monetary policy. Federal Reserve (FED) Chairman Ben Bernanke is due to speak today, and investors are looking for clues on how long FED bond purchasing program will last. Individual FED board members indications last week that the program is coming to a halt immediately strengthened the dollar.
It is, however, assumed that Bernanke is in no rush to turn off the liquidity tap. The US economy is demonstrating steady, but fragile and by no means exceptional progress. New housing data is presented this week along with Chinese GDP numbers. These data are expected to give clear indications as to further momentum. Better data will support riskier assets. The picture is, however, mixed. Some currencies that usually are highly correlated with global economic prospects fell at the end of last week on news of higher than expected Chinese inflation. If Bernanke demonstrates that FED is no hurry to end quantitative easing, it would probably weaken the dollar and strengthen higher-yield currencies as Australian dollar.
Global equity markets continued to soar last week when billions were pumped into global equities. In the week from January 9 investors injected USD 22,2 Billion into global stocks, the highest level seen since 2007. Most of the funds were pumped into global stocks and actively managed funds. It is, however, some skepticism how long this rotation from bonds and more secure assets into securities will continue. Potential disappointing company earnings over the next weeks might constitute a possible set back as will Washington’s wrangling on a debt ceiling and spending cuts.
The Asian stock markets looking for more clear directions, ended flat this morning after impressing late gains. Oil and metals are slightly up as are gold and silver.
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