18 February 2013: Yen plunges with GBP under pressure

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The yen continues to plunge after the G-20 meeting avoided direct criticism of Japan’s aggressive reflation plan which has seen a 20% depreciation in the relation between USD and JPY over the last couple of months. The G-20 opted not to single Tokyo out, but committed its members to refrain from competitive devaluations. Monetary policies should only be directed at price stability and growth. Japan saw the decision as a green light to pursue its expansionary policies.

The dollar soared 0,7 percent to 94,17 inching closer to 94,465 reached last Monday. This is the highest level seen on Yen since May 2010. Euro/JPY traded at 125,51 close to the peak on 127,71 touched on February 6. EURO/USD is at 1.3334, stabilizing on the same level before the end of last week. The British Pound (GBP) trades at 1,5489 against the dollar close to the bottom level from last week.

The weak yen had a positive influence on Japanese stocks. The Nikkei average 225 jumped 2,3% with exporters and banks being the big winners. Japan is waiting the appointment of a new Governor of Bank of Japan (BOJ). Prime Minister Shinzo Abe’s candidate, Toshiro Muto, is expected to intensify stimulus to energize the economy. The Asia Pacific, MSCI-index eased back 0,2% after reaching a 18-1/2-month high on Friday. Australian shares AXJO rose 0,5%. Markets in China and Taiwan have opened again after one week holiday.

Demand for commodities are expected to be in focus as China returns to market. Policymakers in Washington are discussing a package of budget cuts to kick in on March 1st. Such austerity measures will probably have a negative impact on US growth. Crude prices are marginally down. Brent trades at USD 117,82 a barrel. Gold has rebounded from a six month low and trades at 1612 on bargain hunting and Chinese buying of physical gold after the Lunar New Year. 

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