Thursday, July 17, 2014

USD/JPY--USD/RUB

At a policy meeting this week, the Bank of Japan opted to hold course with its current monetary easing, and the minutes will be released later on Thursday. Any unexpected dissensions amongst policy makers in the minutes could have an impact on USD/JPY. Under current monetary policy, the money base has been increasing at an annual pace of 60-70 trillion yen. This has led to a severe weakening of the yen, so traders can expect the currency to remain below the 100 level, absent unexpectedly strong data out of Japan.

Fresh US sanctions against Russia drag the ruble down to a six-week low against the US dollar, but Morgan Stanley says the current pace of the selloff won't be sustained. Higher oil prices should benefit the ruble; Russia is a huge oil exporter, and lofty oil prices will lead to more money being converted into rubles to buy Russian oil. Russia's central bank also may step in to stabilize the ruble and cap its weakness. Morgan Stanley warns about potential spillover effects in the Polish zloty and Hungarian forint, which are down today against both the euro and dollar. USD/RUB at 34.93, up 1%.