Forex Flash: Yen depreciation triggers Nikkei surge – Deutsche Bank

In an otherwise quiet start to the week for news flow and economic data, perhaps the most interesting developments in the past 24 hours have been in Japan where the Nikkei jumped 2.2% overnight. The latest positive catalyst has come from comments from the US Treasury undersecretary for international affairs, Lael Branaird.

Although Branaird warned that "the G-20 needs to deliver on the commitment to move to market-determined exchange rates and refrain from competitive devaluation", she said that she is supportive of the effort in Japan to end deflation and reinvigorate growth. According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “Markets appear to have interpreted Branaird's comments to mean there will be no US Treasury interference if there is further yen depreciation.”

Indeed, the USD/JPY added more than 1% on the headline and is currently trading at 94.00, or close to three-year highs. The Nikkei is also playing catch-up after being closed yesterday when Asia Development Bank president Haruhiko Kuroda, a candidate for the next BoJ governor, commented that he thinks further monetary stimulus is justified in 2013 and after the economy minister said that he would like to see the Nikkei at 13,000 by the end of March.