BOJ Holds Monetary Policy, Yen Slightly Strengthens, S&P Upgrades US Outlook - 11.6.2013

The Bank of Japan decided to maintain its monetary policy with key rate remaining at record low between 0% and 0.1%, monetary base will increase at the same pace around ¥60-70 tln per year. Concerning asset purchases JGBs purchases will continue at ¥50 tln increase per year with 7 years average maturity, ETFs purchases at ¥1 tln per year, J-REITS at ¥30 bln per year and for corporate bonds will continue until they reach target amount. NIKKEI 225 dropped by 1.45% after the BOJ decision as investors were expecting further enhancing steps by BOJ Governor, Kuroda, mainly to calm down turbulence in bond markets. The USDJPY dipped from resistance at 99.03 to 97.81 immediately after the decision of BOJ, it appears that the market discounted possible steps towards more aggressive asset purchases.

Standard & Poor’s raised the long-term outlook rating of the US from negative to stable yesterday and that is further increasing chances of FED withdrawal from current size of asset purchases, backed by previous week stable solid jobs report. The Euro against the greenback advanced from support at 1.3181 towards resistance at 1.33 and chances for further highs are improving, however at 1.3345 is a major resistance and that could limit upside. Elsewhere, the Aussie remains near support at 0.94 against the US dollar, USDCAD has been in a tight range between 1.0214/1.0173 in the recent trading and the sterling is in sideways trading around 1.5580 versus the US dollar.