End of Abenomics ups yenPeter Rosenstreich
The yen surged against the US dollar: USD/JPY fell to 105.6, down nearly 2% over the past month. Driving the move is a putative scandal involving Japan’s Prime Minister Shinzo Abe, who along with his wife is accused of illegal intervention in an Osaka land sale. Last week Japan’s finance ministry announced that documentation of the discounted sales to Moritomo Gakuen has been altered. With suspicions swirling of a cover up, the opposition is calling for resignations of Abe and Finance Minister Taro Aso. Two opinion polls published over the weekend indicated that Abe's support is at its lowest since he took office in 2012: the majority of Japanese believe he is accountable for the scandal.
Despite fundamentals not warranting a strong JPY without Abenomics, the end of Abe will likely drive JPY higher. We remain negative on USD/JPY, looking next at 104.30 support.
People’s Bank of China new governorBy Vincent-Frédéric Mivelaz
Prospects of a new central bank governor boosted equities. Hong Kong’s Hang Seng and Shanghai’s Composite increased by 0.10% and 0.29% to 31’538 and 3’279. USD/CNY is stabilizing at 6.33 (-0.08%) and expected to trade sideways in the short-term.
Former governor Zhou Xiaochuan announced his retirement months ago, saying a new governor would take over on 19 March. Speculation converged towards Liu He, President Xi Jinping’s former economic adviser, who made a splash at this year’s World Economic Forum in Davos. But, with the objective of maintaining monetary policy and continuing financial reforms, the crown went to Yi Gang, a former deputy governor who joined the central bank in 1997. The People’s Bank of China will govern not just monetary policy, financial reforms and the promotion of foreign investment in the country, is also will implement laws and regulations for banking and insurance. This should add control and stability to the Chinese economy, which suffers from shadow banking and industrial overcapacity. Meanwhile, Liu He was not overlooked: he is appointed as one of China’s four vice-premiers to Xi Jinping.