Yen Soft As BoJ Kept Monetary Policies Unchanged

The Japanese yen remains soft in Asian session as BoJ kept monetary policies unchanged as widely expected. Board members voted unanimously to keep the target of monetary base expansion at an annual pace of JPY 60T to 70T. That includes JPY 50T in JGBs with average remaining maturity of seven years, JPY 1T in ETFS, JPY 30b in J-REITs, as well as CPs and corporate bonds. In the accompanying statement, BoJ noted that the domestic economy has been "recovering moderately" with pick up in exports and business fixed investments. The economy is expected to "continue a moderate recovery as a trend". Meanwhile, with CPI at 1%, "inflation expectations appear to be rising on the whole". Kiuchi proposed again to change the 2% inflation target to a medium to long term target but was voted down by 8-1.

Technically, the Japanese yen is the second weakest currency this month, just next the Australian dollar. And it's weakest against New Zealand dollar and Swiss Franc. While the NZD/JPY's rebound from 75.08 low extended higher this week, we'd like to point out that the momentum is rather unconvincing. Indeed, the pair failed to display an impulsive look since around September. And it's still possible that the current rise is merely a second leg of the consolidation pattern from 86.39. We'll stay cautiously bullish in the NZD/JPY in near term, but will continue to watch out for reversal signal at it hits 86.39 key resistance level. And a break of 83.96 support will be the first sign of near term reversal and would turn focus back to 55 days EMA (now at 83.16).
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Elsewhere, the dollar remains generally firm against other major currencies except that for the retreat against Canadian dollar. The Dow closed at another record high of 16179.08 overnight, but that was only a small gain of 11.11 pts. 10 year yield rose to 2.925% and is getting closer to recent high of 2.984%. But 30 year yield struggled at around 3.9% level. Overall, market volatility would likely reduce much ahead of the weekend and the holiday shortened week next week.

On the data front, UK Gfk consumer sentiment dropped to -13 in December. Germany will release PPI and Gfk consumer sentiment in European session today. UK will release Q3 GDP final reading and public sector net borrowing. US will release Q3 GDP final. Canadian data could provide some volatility with CPI and retail sales featured.