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Reduced bond-buying from the BOJ turned out to be bullish for the yen, while better-than-expected data kept the Aussie and Kiwi supported throughout the session.

  • Japan’s average cash earnings (y/y) jumps from 0.2% to 0.9% in November
  • U.K.’s BRC retail sales monitor (y/y) retains 0.6% growth in December
  • Australia’s building approvals up by 11.7% vs. 0.9% decline expected, 0.1% dip in October
  • Australia’s ANZ job ads slip by 2.3% vs. 1.1% gain in November
  • Japan’s consumer confidence dips from 44.9 to 44.7 in December
  • BOJ reduced its bond-buying today

Major Events/Reports:

Australia’s data releases

Data from the Land Down Under showed that building approvals rising by a strong 11.7% for the month of November. The 5.6% increase in Victorian apartment approvals might have boosted the volatile report.

Still, it was good news for investors who had expected a 0.9% decline for the month and were worried that 2017’s strong figures would result in weaker approvals in 2018.

Meanwhile, a job ads report printed a 2.3% decrease in December, which effectively unwinds most of the increases in the past two months.

BOJ’s new spending habits

New year, new spending habits? The biggest story of the Asian session was the Bank of Japan’s (BOJ) decision to tweak its bond-buying operations.

For newbies out there, you should know that the BOJ has pledged to buy Japanese government bonds (JGBs) at an annual pace of 80 trillion JPY. BOJ Governor Kuroda didn’t set specific monthly targets, but said that they will aim to drag 10-year JGB yields to 0%.

But earlier today the central bank reduced its purchases of JGBs with 10 to 25 years left to maturity to 190B JPY (down from 200B last time) while purchases of JGBs that will mature in 25 to 40 years went down from 90B to 80B JPY.

Not surprisingly, market players took the move to mean that the BOJ is low key starting to “taper” its purchases and proceeded to buy the yen. Of course, it didn’t hurt that Kuroda himself has hinted that he and his team might start talking exit this year.

Word around the hood is that leveraged funds – who didn’t like the decreased spread between U.S. and Japan’s bond yields – bought a lot of JPY today.

So far so good for our Great ContrarYEN trade prediction!

Overall risk appetite

The return of Japanese traders from a long weekend; optimism from the previous session, and bullish reports from both Japan and Australia today all contributed to a risk-friendly environment for Asian session traders.

  • Nikkei is up by another 0.62% to 23,861.5;
  • Australia’s A SX 200 is up by 0.21% to 6,140.6;
  • Hang Seng is up by 0.37% to 31,014.3, and
  • Shanghai index is up by 0.08% to 3,412.24.

Even Brent crude oil popped up by 0.41% to $68.16 while U.S. WTI also rose by 0.48% to $62.18. A bit of dollar-buying dragged oil prices by 0.11% to $1,1318.83 though.

Major Market Mover(s):

JPY

The BOJ’s surprising move to significantly reduce its asset purchases took market players by surprise and inspired yen-buying across the board.

USD/JPY is down by 47 pips (-0.42%) to 112.62;
EUR/JPY is down by 51 pips (-0.38%) to 134.83;
GBP/JPY is down by 51 pips (-0.33%) to 152.93, and
CHF/JPY is down by 44 pips (-0.38%) to 115.29.

Comdolls

Australia’s strong building approvals report and a risk-friendly environment pushed commodity-related currencies higher against the Greenback.

AUD/USD is up by 19 pips (+0.24%) to .7862;
NZD/USD is up by 6 pips (+0.08%) to .7183, and
USD/CAD is down by 13 pips (-0.11%) to 1.2409.

They all had nothing on the yen’s strength, however.

AUD/JPY is down by 12 pips (-0.14%) to 88.55;
CAD/JPY is down by 28 pips (-0.31%) to 90.76, and
NZD/JPY is down by 26 pips (-0.32%) to 80.89.

Watch Out For:

  • 6:45 am GMT: Switzerland’s unemployment rate to remain at 3.0%?
  • 7:00 am GMT: Germany’s industrial production (1.9% expected, -1.4% previous)
  • 7:00 am GMT: Germany’s trade balance (20.7B EUR expected, 19.9B EUR previous)
  • 7:45 am GMT: France’s trade balance (-4.8B EUR expected, -5B EUR previous)
  • 8:00 am GMT: Switzerland’s foreign currency reserves
  • 8:15 am GMT: Switzerland’s retail sales (y/y) (-2.5% expected, -3.0% previous)
  • 9:00 am GMT: Italy’s unemployment rate (11.0% expected, 11.1% previous)
  • 10:00 am GMT: Euro Zone’s unemployment rate (8.7% expected, 8.8% previous)