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Yesterday the yen weakened the most in a month against the dollar after Fitch Ratings cut Japan’s credit ranking, saying the nation isn’t acting quickly enough to tackle its public debt burden. Fitch lowered Japan’s long-term, foreign-currency ranking to A+ from AA, and cut the local-currency grade to A+ from AA-, the company said in a statement. The outlooks on both are negative, it said. Japan’s currency fell versus all its 16 major peers as the central bank started a two-day meeting amid speculation it will boost stimulus measures to spur flagging growth. Japanese Finance Minister Jun Azumi told reporters the expects the Bank of Japan to take appropriate steps in a timely manner. He said he regards highly the steps taken by the central bank since February. The BOJ expanded its asset-purchase program in February and April.
The euro dropped toward a four-month low against the greenback after the Organization for Economic Cooperation and Development said Europe’s debt crisis risks spiraling. Gross domestic product in the euro region will shrink 0.1 percent this year and expand 0.9 percent in 2013 instead of posting growth of 0.2 percent and 1.4 percent as predicted last November, the Paris-based organization said. German Chancellor Angela Merkel said yesterday she won’t shy away from disagreeing with French President Francois Hollande at the European Union summit beginning tomorrow in Brussels.
The pound snapped a two-day gain versus the dollar as the IMF said more stimulus such as quantitative easing, or QE, was needed to boost the economy. A government report showed inflation slowed in April more than economists forecast.
EUR/USD: yesterday the pair fell to the last week’s low.
GBP/USD: yesterday the pair fell below $1.5800.
USD/JPY: yesterday the pair gain to Y80.00.
On Wednesday ECB current account is due, at 0800GMT. UK data provides the focus of the morning, with the latest Bank of England MPC Minutes and also Retail Sales data both at 0830GMT. The BoE minutes will likely show a split on the MPC. MPC member David Miles voted for stg25 billion extra in quantitative easing in April and things have, arguably, deteriorated since then so he looks sure to have dissented again in May. US data starts at 1100GMT with the weekly MBA mortgage applications data. This is followed at 1400GMT by monthly New-Home Sales data and also the FHFA Home Price Index.
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