Week in FX Asia-What’s it take to weaken that Yen?

A global financial meltdown, a Tsunami or even a nuclear mishap has not been able to weaken Yen significantly. The Yen bears will be pinning their hopes on a strong majority win by the Liberal Democratic Party in this Sunday’s elections.

Currently, investors continue to pare some of their short yen positions ahead of this weekend’s Japanese election. In doing so, they have managed to pull USD/JPY further away from its eight-month high printed earlier.

Will the LDP win a majority? They require a big enough parliamentary win to pressure the BoJ into easing more aggressively. If the results are a slam-dunk for the LDP, the bears will expect the dollar to break through this year’s high with considerable ease (Y84.19).

Spare a thought for the hapless BoJ, they have been easing all year and have put little dent into the Yen’s persistent strength. What can they do that will have a material effect? Buy foreign bonds perhaps, certainly a solution and one that would garner strong resistance from the MoF and the Japanese government. Maybe all it takes is “incompetence” to do the job?

• Business Confidence in Japan Is Deteriorating
• China HSBC Flash Manufacturing PMI Rises Again
• Aussie and Kiwi Rise Against Yen After Report on China Manufacturing
• Yen Hits 9-Month Low
• Japan GDP Contract into a Recession
• Australian and NZ Dollars Near Two-Month Highs Before Fed Meeting
• Chances for a Revival in China’s Economy
• Output, Retail Sales Data push China Stocks to Four-Week High

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