Market Sentiments: Yen Rising Again

The market participants are still trying to translate the stimulating wave which has been sent out from BOJ last week by showing extending possibility of its JGB maturities holding with doubling the amount it has of them by the end of 2014 by buying what are from 60 to 70 trillion yen yearly.

You can see now the yield curve of JGB 10 years up to 0.53 from 0.45% at the time of these decisions and what’s below 0.5% before them and this can be read by different ways

The first, it is tending to taking risks selling the bonds looking for unlock of the safe haven positions while this wave is causing rising of the risk appetite even in some emerging markets.

Second, it has added to the worries about the Japanese financial situation amid these easing financial and monetary policies while Japan is one of the great countries that carries a GDP/ Deficit ratio above 10% but it looks to it not important as the economic situation which is in need for stimulation and this is obvious from the Japanese official comments which have only one direction until now.

The third is in the case of the success of these measures which can be in a longer period than what we are, as that can trigger rising in prices making the bonds less attractive than what are they currently pushing down the JGP prices driving up its yield.

So, the Japanese yen was the biggest loser until now and it can be exposed for further pressure amid these measures which are looking for ending deflation anyway as we see and as Shinzo Abe’s advisor Hamada is looking for. He has told today that it is very early to worry about an exit of these policies of BOJ which can be fueled by more funds in the case of not achieving the target.

The single currency has tried today to reach 130 versus the Japanese yen and it is the first time it does since January 2010 while the greenback retreating versus the Japanese yen on a profit taken wave which followed strange comments from FM Japanese Aso that “the excessive yen strength is now being corrected.” It has been capped over 98.69 and it is now rising back again, having a place above 99 can make 100 psychological level vulnerable again.