Yen surged further today as risk aversion sent Nikkei 225 down -454 pts, or -2.98% to close at 14778.37. That's the biggest fall in 5 months and the index hit a 2-month low. It should be noted that the steep fall was also accompanied by strong volume, as futures volume hit the highest level in 6 months. In addition, to the tensions in Ukraine, markets are reminded of the geopolitical risks in Iraq again. US President Obama authorized air strikes in Iraq which might stir up even more tensions in the region. In the current markets, Swiss Franc and Euro were so far the second and third strongest currency this week. And commodity currencies are generally hit by the sour sentiments.
The BOJ today left the asset buying program to increase the monetary base at an annual pace of 60 to 70 trillion yen. In the policy statement, policymakers indicated that "exports have shown some weakness". This was compared with the language in July that "exports have recently leveled off more or less". On industrial production, the BOJ acknowledged that output "has continued to increase moderately as a trend, although it has recently shown some weakness". In July, the central bank noted that production had "continued to increase moderately as a trend, albeit with some fluctuations". Also released from Japan, current account surplus narrowed to JPY 0.13T in June and bank lending rose 2.2% yoy in July.
China's trade surplus widened to USD 47.3b in July from USD 31.56b a month ago. The record high reading was driven by acceleration of exports growth and decline in imports. Exports rose 14.5% yoy to USD 212.9b, following a 7.2% increase in June, whilst imports fell -1.5% yoy to USD 165.6 , after a 5.6% increase in June. Despite the strong headline reading, the details unveiled sluggish domestic demand as commodity and component imports dropped.
Elsewhere, Australia home loans rose 0.2% in June versus expectation of 0.7%. Swiss unemployment rate was unchanged at 3.2% in July. German trade surplus narrowed to EUR 16.2b in June. UK will release trade balance and construction output. US will release productivity and wholesale inventories. A focus will be employment data from Canada in US session.