Contours of the FX Market in the Week Ahead
January 28, 2013 - 6:20am
There are two main forces shaping exchange rates. The first is the continued depreciation of the Japanese yen and the second is the appreciation of the euro. The newly elected government in Japan is pursuing an aggressive stimulative policy to strengthen the economy and finally arrest deflation. Many, however, doubt that the combination of new government spending and measures by the BOJ are sufficient in themselves to push inflation to even 1% this year. Neither the BOJ nor the Abe government itself believes it, as reflected in their forecasts. Japanese officials are encouraging the market to weaken the yen. Yet previously Japanese officials have tried talking the yen down, but with little results. What makes this time different? Although the push back against Japanese official rhetoric appears to be widening, there is more to the yen's w...
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