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A lack of economic catalysts inspired a round of profit-taking that pushed the dollar lower against its major counterparts.

  • BOJ’s meeting minutes reveal members’ confidence over economic recovery, fluctuations in bond purchases
  • AU MI leading index improves from -0.1% to 0.0% in May
  • Japan’s all industries activity up by 2.1% vs. 1.7% expected, -0.7% previous

Major Events/Reports:

BOJ’s meeting minutes

Data from the Bank of Japan (BOJ) printed earlier today hinted that the central bank members remain unfazed by pressure to decrease their monetary stimulus.

In its meeting minutes, BOJ members expressed their optimism over exports, saying that it would “likely continue their firm increase for the time being” as demand from its global trade partners continue to pick up. Ditto for business fixed investments, which is expected to “continue increasing moderately” on the back of higher corporate profits.

Private consumption is also expected to “follow a moderate increasing trend” as higher employee income and higher stock prices eventually give more disposable income for Japan’s consumers.

This is probably why the BOJ upgraded its economic outlook from saying it “has continued its moderate recovery trend” to “has been turning toward a moderate expansion.

The central bank isn’t feeling as peachy over inflation, however. Thanks to tepid wage growth, low inflation expectations, and volatile commodity prices, the BOJ believes that “risks to Japan’s economic activity and prices were skewed to the downside.

Dip in overall risk appetite

Asian bourses took a step back from their gains this week, as lower oil prices pulled the dollar lower (oil is priced in $, remember?) during the early Asian session. The dip in USD/JPY, in turn, dragged Nikkei lower.

The higher-yielding currencies didn’t get dollar aversion part of the memo, though, and they soon lost against the Greenback despite a lack of major economic catalyst.

China A shares to be included in MSCI EM index

After years of waiting, U.S. index provider MSCI has finally agreed to include a selection of China’s “A shares” to its Emerging Markets Index (MSCIEF).

This is a yuuuuge victory for the Chinese government, which wants to open up its capital markets and increase the circulation of its local currency.

The yuan-denominated stocks might only represent 0.73% of the benchmark, but it would still get the attention of those who are tracking the index.

The stocks are expected to be included in a two-phase process in May and August next year, though it will still depend on progress on China’s reforms and capital controls.

Not surprisingly, the move boosted China’s stocks higher:

  • Nikkei is up down by 0.47% to 20,136.00
  • Australia’s A SX 200 is down by 1.40% to 5,676.40
  • Hang Seng is down by 0.60% to 25,687.00
  • Shanghai index is up by 0.49% to 11,117.37

Major Market Mover(s):

Comdolls

Lower commodity prices and a bit of risk aversion in the markets pushed the higher-yielding currencies lower against the dollar and the yen.

AUD/USD is down by 7 pips (-0.09%) to .7567, AUD/JPY is down by 25 pips (-0.30%) to 84.16, USD/CAD is up by 6 pips (+0.05%) to 1.3272, and CAD/JPY is down by 21 pips (-0.26%) to 83.81.

Watch Out For:

  • 8:30 am GMT: U.K. public borrowing (7.3B GBP expected, 9.6B GBP previous)