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Forex pairs in this Article » USD/JPY
Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that the FX market has been relatively stable overnight with AUD under performing following weaker than expected Australian employment report for December.

He notes that the report revealed that the Australian economy shed -5.5k jobs in December helping to lift the unemployment rate up to 5.4%. Labour market weakness evident in December appears mainly a correction following strength displayed in prior months. He sees that the underlying trend for employment growth remains broadly flat with the unemployment rate likely to rise further in 2013. The negative terms of trade shock from the sharp drop in Australia's key commodity export prices over the last couple of years is resulting in weakening domestic demand conditions keeping pressure on the RBA to ease monetary policy further in 2013.

However, Hardman sees that Australia's terms of trade are currently rebounding as the outlook for external demand is improving as evident by iron ore prices having already erased their decline from last year, although still remain around 25.0% lower than their peak from early 2011. Building optimism over global growth may prompt the RBA to hold fire on a further rate cut at their next meeting on 5th February although it is more likely to only prove a delay to further easing.

The negative impact of RBA monetary easing on the Australian dollar has proved modest with robust portfolio inflows still attracted by Australia's relatively high rates. Elsewhere, he comments that the yen's correction higher earlier this week triggered by comments from Japanese Economy Minister Amari has paused overnight. Also, he highlighted yesterday Economy Minster Amari's comments had been misinterpreted by some market participants as stating that the yen was now in line with fundamentals.

He notes that the misunderstanding has been cleared up by the Economy Minister Amari overnight who clarified that he meant that the Yen is still in the process of correcting back into line with fundamentals. He adds that there e has also been increased speculation overnight that Asian Development Bank President Kuroda maybe the leading candidate to replace Shirakawa as BoJ Governor given his experience in managing a large organisation and international experience.

Hardman finishes by writing, "In recent comments he called on the BoJ to ease monetary policy until 2.0% inflation is reached, and described the yen as slightly overvalued which is in line with our view. Also of note Chairman of the Japanese Bankers Association Sato stated that he sees some adverse effect if USDJPY rises to 100.00."
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