The yen was again under pressure during the Asian session, on reports that the Japanese Prime Minister will soon call snap elections. The argument goes that snap elections will lead to additional stimulative policies, although the concrete evidence for that is not so clear right now. It is also possible that the market is pretty much using excuses to sell the yen and drive it lower for now, given the massive addition to monetary stimulus that the Bank of Japan undertook on October 31. The government’s intention to delay the sales tax hike could also be a demonstration of its bias towards stimulus policies.
In Japanese economic data, Japan’s final industrial production growth for September was revised up to 2.9% month-on-month compared to the 2.7% preliminary estimate.
Dollar / yen made session highs at 115.87, close to the 7-year high of 116.10 made on Tuesday. Euro / yen also scaled the 144 level once more to trade around 144.10, having traded as low as 143.33 the previous day.
The Australian dollar also gave up some ground after the Reserve Bank of Australia Assistant Governor Christopher Kent stated that the currency was overvalued – particularly given the declines in key commodity prices that Australia exports. Kent did not rule out currency intervention in order to correct the situation. The aussie lost around 60 pips after Kent’s talk from 0.8732 to 0.8670 (session low), but subsequently managed to rebound to around 0.8710. The aussie has recently rebounded from its 4-year low around 0.8540, but it remains to be seen whether it can trade north of 89 cents in order to steer itself clear of trouble.
The day ahead was likely to be quiet in terms of economic data, as apart from final German inflation numbers for October (confirmed at 0.8%) and September job openings data from the US, some speakers from the ECB and Fed will also talk. Friday was looking to be more interesting, with Eurozone third quarter GDP and US retail sales for October.