The Japanese yen came under pressure in the previous Asian trading exchanges on growing speculations that a potential change in the Japanese administration would force the Bank of Japan (BOJ) to implement more aggressive economic measures to shore up the economy. On the other hand, the Australian dollar rose on optimism that a Greek decision would be reached next week, and on China’s better manufacturing data.
Political uncertainties in Japan still direct the movement of the Samurai, and until the election next month, the currency is likely to manifest weakness. Shinzo Abe, leader of Japan’s opposition Liberal Democratic party, has urged the BOJ to aggressively ease monetary policy and his potential victory is seen to put at risk the central bank’s independence. Governor Masaaki Shirakawa rejected Abe’s calls during a BOJ Press Conference saying that unlimited printing of money is damaging to the economy, and deemed the former’s 3 percent-target inflation as unrealistic. With expectations that Abe would push for more easing should he win, the Yen is likely to show further weakness.
Meanwhile, risk sentiment is expected to improve as China’s manufacturing data accelerated in November for the first time in 13 months, indicating the country’s recovery after seven straight quarters of slowdown. China’s manufacturing sector returned to the expansion territory in November at 50.4 points, boosting appeal of riskier assets. Also seen to improve market sentiment is the statement of German Chancellor Angela Merkel that a decision on Greece’s debt restructuring program is possible on Monday, after the Eurogroup leaders failed to forge an agreement during their meeting in Brussels this week. With risk sentiment seen to improve on better Chinese data and hopes of a Greek decision next week, the Aussie is expected to incline. Thus, a long position for the Aussie-Yen pair is suggested in today’s Asian trades.
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