Yen Firm After BoJ Minutes

The yen is firm as the week started, as Japanese equities tumbled with Nikkei down over -400 points. The BoJ minutes for the April meeting suggested that while policymakers generally agree asset purchases should continue until the inflation target of 2% is reached, some of them were concerned that the target might not be achieved. The central bank also raised the economic outlook. Meanwhile, Governor Haruhiko Kuroda’s comments that the financial system can cope with the rise in interest rates have sent the Japanese yen higher - and Japanese shares lower.

Over the weekend, BoJ governor Kuroda said that Japanese financial institutions possess "sufficient resilience" against any surge in bond yields, as long as the moves are driven by an improved economic outlook. He said there is no sign of excessive bullish expectations in asset markets yet. He urged the government to "map out a clear plan to restore Japan's fiscal health and a growth strategy". He also urged commercial banks to be more aggressive in lending. He emphasized that "the process to overcome deflation is also the process for the financial system to recover its vigor."

The economic calendar is light today with the U.K. and U.S. are on holiday. A major focus this week will be the Bank of Canada rate decision. Markets expect the central bank to kept rates unchanged at 1.00%. Other data due:the U.S. consumer confidence on Tuesday, Spanish bond auction on Wednesday, U.S G.DP revision on Thursday, Japan CPI, Canadian GDP and U.S. personal income and spending on Friday.

Laster, CFTC data showed that net positions in many major currencies deteriorated on May 21 compared to the prior week. Indeed, Euro, yen, Sterling and Aussie net shorts rose to 2013 high. Euro net shorts rose further to -80.9k contracts, from -46.9k and hit 2013 high. Yen net shorts rose to -95.2k, from -88.4k also a 2013 high. Sterling net shorts jumped to -77.0k, from -65.4k, making a 2013 high. Australian dollar net shorts rose to -32.4k from -13.5k. Canadian dollar net shorts dropped to -33.9k from -44.4k.