Yen Sell-Off Continues On Abe's Comments

The yen's sell-off continues as the week starts in response to Japanese prime minister Abe's comment. Abe said on Sunday that it's import for the joint statement between the government and BoJ to include "the price goal of 2 percent." He criticized the BoJ's current inflation target, saying that 1% lacks "strong determination." Also, he said that the next BoJ governor to replace Shirakawa in May should be someone who would take "bold monetary steps and is in line with our points."

Meanwhile, it's reported that the ruling LDP would consider to buy foreign securities up to JPY 50T to further weaken the Japanese yen. USD/JPY rose to as high as 89.66 and is heading to 90 psychological level. EUR/JPY is at as high as 119.97 and is heading to 120 psychological level.

Meanwhile, euro continues to extend last week's post ECB rally. EUR/USD breaches 1.34 today, EUR/GBP is pressing 0.83. EUR/CHF is also strong and jumps further to as high as 1.2231. A Financial Times reports said there's a eurozone proposal currently being drafted by eurozone finance ministers stating that countries seeking help from the ESM must either invest alongside the EMS or guarantee it against any losses.

Last week, the outgoing Eurogroup chief Juncker said that the eurozone should use the ESM to directly recapitalize banks and reduce the burden on countries. And that would be a significant step in breaking the link between indebted banks and eurozone sovereigns.

In US, Chicago Fed Evans said that give more "explicit conditionality" markets are more confident that Fed will "provide the monetary accommodation necessary to close the large resource gaps that currently exist." And, "the public can be more certain that we will not wait too long to tighten if inflation were to become a substantial concern." The comments were regarding Fed's move to pledge to keep rates near zero until unemployment rate drops to 6.5% or as inflation expectations stays below 2.5%. A number of Fed officials will speaker today including Bernanke and Rosengren. Also, Fed will release its Beige Book economic report.

In Australia, Treasurer Swan said that he's optimistic that "2013 will be a better year for the global economy." And, "one cause of optimism is recent evidence that China’s economy appears to be stabilizing after economic conditions moderated in 2012." Swan noted that the global economy "remains hostage" to two familiar downside risks of fiscal situation in US and debt crisis in Europe. But "both sides of the Atlantic have recently made encouraging progress in dealing with these challenges."

According to latest CFTC data, Investors turned net euro short again on January 8 at 8k net shorts contracts after turning net long for the first time in 16 months in the prior week. Yen net shorts continue to recede to 74.0k contracts comparing to December's high of 94.4k. Sterling net long dropped sharply to 25.9k comparing to December's high of 37.3k. Australian dollar positions were steady at 80.3 net long. Canadian dollar positions were also steady at 64.0k net long.