21 January 2013: Yen volatile prior to BOJ meeting

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Yen firmed this morning after USD/JPY dipped below 90 yen a dollar last week. Investor’s eyes are on this week’s Bank of Japan’s (BOJ) meeting which starts today. BOJ is expected to follow up the newly elected Abe’s government’s call for strong monetary easing measures. Asian shares were steady at the start of the new trading week after searching to multi-month highs on Friday. Dow Jones gained marginally in New York on Friday with Nasdaq weaker. General Electric and Caterpillar were up, while the technology company Intel lost 6,31%.

Euro/USD has stabilized in early Monday trading at 1.3325 while British pound, GBP, continues to fall against the Euro and the dollar. Commodity and oil prices are up on last week’s 7,9% growth in the Chinese GDP and better than expected US labor and housing data. Brent crude trades at USD 111,54 a barrel. Precious metals, Gold (1690) and Silver (31,95), seem to follow up the upward trend from last week.

The dollar reached 90,25 and a fresh two-and-a-half-year high against the yen when markets in Asia opened today. The Euro rose to 120,27 yen near its peak of 120,73 reached on Friday. Profit taking pushed dollar and euro down, but short covering lifted them off their lows. The last two month’s fall in the yen will continue if BOJ decides on tough measures such as a firm commitment buy assets till the 2% target for inflation is reached.

A weaker yen has strengthened Japanese exports and have already been met with accusations of unfair competition from the US car industry. The US government has for years accused China for deliberately manipulating their currency to the disadvantage of US exporters and home producers. A currency war, where countries again are looking for precious metals as a buffer and basis for their currencies, seem to loom in the background. These speculations have gained ground on the recent decision by the German Central bank to have 20% of their gold reserves in US and their total reserves in France transferred back for storage in Germany.

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