AUD/JPY: Yen Dives as Abe Expected to Nominate ADB Chief Kuroda as Next BOJ Governor

The Japanese yen is deemed to weaken against the Australian dollar today as sources have revealed that the Japanese government is likely to nominate Asian Development Bank President Haruhiko Kuroda, an advocate of aggressive monetary easing, as the next Bank of Japan governor. Meanwhile, reduced expectations of a rate cut by the Reserve Bank of Australia are seen to lift the Aussie.

The Kyodo news service reported that Japanese Prime Minister Shinzo Abe is preparing to nominate ADB President Haruhiko Kuroda as the next BOJ governor to the Japanese Diet in the middle of this week. Likewise, Abe is also expected to fill one of two deputy governor posts with Kikuo Iwata, an academic critical of BOJ policy and a supporter of unorthodox monetary easing steps. Kuroda has been regarded a strong candidate to replace current governor Masaaki Shirakawa considering his extensive experience in international policy. Analysts say that appointing Kuroda could help Abe follow through on his pledges to combat deflation and revive the Japanese economy, a prospect that has already weighed on the Yen and triggered a stock rally.

As Japan’s top diplomat from 1999 to 2003, Kuroda aggressively intervened in the exchange-rate market to weaken the Yen to support the export-reliant economy. In a sign of this to come, Kuroda said the central bank still has substantial room for further easing and additional measures could be justified this year in an interview last February 11. As such, his appointment is most likely to nudge the central bank into more aggressive and unconventional measures to achieve its 2 percent inflation target. On expectations that the reported nominees will steer the central bank toward bolder stimulus measures, the Yen is apt to weaken today.

Over to the Land Down Under, RBA Governor Glenn Stevens endorsed the current level of interest rates, signaling a respite in its aggressive rate-cutting cycle. In a testimony to a parliamentary panel in Canberra, Stevens remarked that there is a good deal of interest rate stimulus in the pipeline. “I feel we are at the appropriate level right now,” Stevens said, adding that the substantial cuts last year were helping stimulate growth. He pointed to stronger home and share market prices as signs the cuts were so far working. With the RBA head managing to reduce expectations that the RBA would cut the cash rate further in the next few months, the Aussie is deemed to rise, warranting a long position for the AUD/JPY trades today.

For more news, analysis, technical charts and candlestick analysis, visit AlgosysFx Forex Trading Solutions