FXEmpire | December 26 2012 1:53 EST
This morning Japan officially installed newly elected Shinzo Abe as Prime Minister. With little news to move markets the focus will be on Japan and Abes economic and financial agenda. This weekend in an interview Shinzo Abe drew a line in the sand, stating that if the Bank of Japan does not comply with his plans and goals that he would seek to change the laws that separate the central bank from political control and pressures.
Although the Bank of Japan last week added an additional 10trillion yen to its asset purchase program, which was expected by the markets it rebuked Abes demand that the inflation target of the bank be changed from 0-1% to over 2%, even though this would not have a direct effect on the bank at this time, it could affect its future financial plans. The Governor of the BoJ said that the bank would consider Shinzo Abes request in its January meeting after the official installation of the Prime Minister.
With little news over the holiday weekend, news flow has focused on this political battle making it global headlines. The USD/JPY has climbed to a 2012 high of 85.26 this morning with the EUR/JPY following right behind at 112.34.
International traders have turned from a risk on mode to a risk off mode in the days before the holiday break as US policymakers could not reach a deal to avoid the fiscal deadline for budget cuts and tax changes.
Congress was dismissed last Thursday by House Speak Boehner after his Plan B vote was cancelled due to lack of support by his own party. Lawmakers will not return to their offices until Thursday, we may see some interesting action on Thursday and Friday, ahead of the New Years break the following week and the deadline quickly approaching.
The dollar index, which measures greenbacks performance against a basket of six major rivals, moved to 79.662, up from 79.575. The US dollar rose against the Japanese yen, after Japans incoming Prime Minister Shinzo Abe said the country must defend itself as other nations attempt to devalue their currencies.
Many European markets are closed today due to Boxing Day holiday so neither major movement nor any economic data expected from euro area. This morning Asian markets are trading marginally up while euro currency is trading almost flat at 1.3176. The GBP is also completely flat at 1.6120.
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Originally posted here