Forex Flash: JPY still the main show in town

FXstreet.com (Barcelona) - This mornings institutional research comes among a lull of European economic data, giving analysts the opportunity to reflect on recent BoJ actions which have forced Yen into a key position as a market mover. Elsewhere in Europe, we have had bailout linked developments in Greece, Ireland and Portugal.

JPY

Jim Reid of Deutsche Bank is expecting further rhetoric about currency wars this week and political and business leaders meet in Washington for the World Bank/IMF spring meetings. He sees that the US Treasury fired the first shot, urging the Japanese to “refrain from competitive devaluation” and “remain oriented towards meeting respective domestic objectives using domestic instruments”. Danske Bank analysts note that JPY remains the main market driver following unprecedented easing from the BoJ and eyes will be focused on flow data regarding Japanese investors’ net purchase of foreign assets which will be published on April 18th.

Jane Foley of Rabobank comments that if a weaker USD and safe haven demand are not good enough reason to slow the pace of USD/JPY upside, perhaps the risk of a revival of the currency wars theme will be sufficient. She is expecting the coming G20 meeting to keep a lid on the pairs upside. Lee Hardman of BTMU notes that there were overnight reports that the BoJ will likely discuss modifying its JGB purchase operations following volatile price action over the weekend. Gareth Berry and Geoffrey Yu of UBS believe that Yen bears should look to May 10th when the weekly portfolio data releases from the MoF are released. Due to a holiday, two weeks worth of data will be released. They add however, “More importantly, more detailed monthly data will break down flows by investment destination (country and currency) and investor category (banks, lifers, non-life insurance, and toushins).

EUR

Lee Hardman of BTMU notes that on a morning that the Troika look to have approved Greece´s latest aid payment, officials of the group will arrive in Portugal today to assess a new round of austerity measure required to secure the new EUR 2bln tranche of financial support. Jim Reid of Deutsche Bank notes that the Italian Parliament will be holding presidential elections on April 18th to elect a successor to Napolitano. Carsten Brzeski of ING notes that at the informal meeting in Dublin, Eurozone FinMins agreed to extend Portuguese and Irish loan maturities by seven years, but showed little progress on fundamental issues. Danske Bank analysts note that one response to the BoJ´s unprecedented action has seen inflows into European bonds which has supported the Euro