Forex Flash: USD/JPY in focus after whispers of changeover in Japan – UBS

The USD/JPY kept its composure overnight despite Thursday's newswire reports that Prime Minister Abe may have to settle for a less radical candidate to succeed BoJ Governor Shirakawa. Abe's desire for much bolder monetary easing is reportedly meeting resistance from inside the MoF, the BoJ, and even within his own cabinet, on fears that radical easing could unsettle the JGB market.

According to Research Analyst Gareth Berry at UBS, “Toshiro Muto may now have the edge over other more yen-negative contenders such as Kazumasa Iwata, but so far the yen has not rebounded on this speculation.” Even a second successive monthly current account deficit did not trouble the USD/JPY overnight. It is still unclear when Abe will announce his pick for governor. Local press reports suggest it will not happen before Abe returns from a bilateral meeting with US President Obama in Washington.

The latest indications are that this meeting is likely sometime during the week beginning Monday Feb 18th (although probably not until February 21 or 22). After that, both chambers of the Diet must give their approval before the new governor can be formally appointed. Elsewhere, the AUD/USD weakened after minor growth and inflation downgrades in the RBA's quarterly Statement of Monetary Policy. But stronger than expected Chinese trade data came to the rescue making good all of the Australian dollar's losses.