Yen Stays Firm on Risk Aversion

The yen is maintaining most of the post BoJ gains that were lifted by risk aversion. The DOW reversed some of this week's rally and dropped -116.6 pts overnight, or -0.76%. The Nikkei followed, dropping over -200 pts at the time of writing and breached 13000 level earlier today. The US 10 year yield closed lower at 2.195% following the initial rally, and pressurizing yen crosses a little. The BoJ’s inaction to calm the bond markets was seen as a factor that squeezed the yen higher. Reports indicated that the Financial Services Agency is planning to force losses on investors of troubled financial institutions to lower the burden on taxpayers.

The euro breached near term resistance of 1.3305 against the dollar, and might be resuming the recent rally. ECB executive board member Praet said the central bank is paying "great attention" to inflation, and discussion regarding the issue was "very rich". Praet noted that there is "room for action in the standard measures", that is, cutting rates further. And, in "exceptional circumstances", negative rates are part of the arsenal.

The MSCI lowered Greece to emerging market status, down from developed market status. It said that in the Greek equity markets, the "in-kind transfer and off-exchange transaction like facilities" are "restrictive" and "unusable". Greece failed to meet the criteria, including securities borrowing, lending facilities , short selling and transferability. Greece was the first developed country downgraded.

On the data front, Japanese domestic CGPI rose 0.1% mom in May and machine orders dropped -8.8% mom in April. Australia Westpac consumer confidence rose 4.7% in June. U.K. employment data will be the main focus today and claimant count is expected to fall -5k in May. Unemployment rate is expected to be unchanged at 7.8% in April. Germany will release the CPI final. The eurozone is due to release industrial production figures.