The FX markets were dominated by JPY sell-off amid Japan saw little criticism in G20 meeting. As the Japansese equities started the week 1.80% up, USDJPY rallied to 99.90 – a new fresh high - early in the session. Nikkei reported that the public support to PM Abe hits 76%, as Japan won the approval to join TPP trade talks from the member countries. In China, Shanghai's Composite fell 0.30%, Hang Seng remained little changed, while Taiex and Kospi index advanced 0.50% and 1.03% respectively.
JPY broadened weakness against all of its G10 major peers. USDJPY rallied to 99.90, yet decent offers towards 100.00 from option players limited the upside in Tokyo. Massive stops are seen above 100.00. The strong demand from retails and importers is likely to further extend the Yen weakness.
Friday afternoon, EURUSD rallied amid Germany's Schaeuble said he would welcome ECB in reducing liquidity even though EU countries are in difficult situation regarding growth. In addition, ECB's Weidmann said that the current interest rates are appropriate in opposition of his Thursday's mention of a rate cut. EURUSD upside was rapidly capped at 1.3129, the pair eased to close the week at 1.3052. EURUSD registered decent volatility overnight as Giogio Napolitona was re-elected as Italian president in hope to stabilize the political situation in Italy. EURUSD rallied to 1.3117, dropped to 1.3039, and stabilized between 1.3050/84 as EURJPY demand has been supportive in Tokyo. Euro opened the European session on negative bias.
At London's closing last week, Fitch announced the downgrade of UK's country rating to AA+. GBPUSD sold-off from 1.5368 to 1.5225 on Friday. Cable extended weakness to 1.5204 in Asia and rebounded to 1.5260 on short-covering overnight. Now, the sentiment in GBP-trading is clearly negative on the weak UK fundamentals and the recent downgrade.
Elsewhere, the Australian Treasurer Wayne Swan warned of bigger deficits, however Aussie remained bid overnight mainly supported by the solid demand in AUDJPY. AUDUSD traded to 1.0308, ASX 200 advanced 0.70%.
Today, the economic calendar is light. We will watch the Japanese March Convenience Store Sales y/y, Swiss March Money Supply M3 y/y, Swiss 1Q Real Estate Index Family Homes, Euro-Zone 2012 Government Debt to GDP Ratio, US March Chicago Fed National Activity Index, Euro-Zone April (Advance) Consumer Confidence and US March Existing Home Sales m/m.
IMOH, Clement I.
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