Over the past few days, Asian markets have been anxiously awaiting commentary regarding the depreciation of the yen out of the G-20 meeting this past… … weekend in Australia.

However, when the topic wasnt covered, FX market reaction was marked.
The G-20 statement only managed to refer to “ensuring appropriate exchange-rate
flexibility, but stopped short of citing the yen's series of declines against the
euro. Further crushing the yen was commentary by Hiroshi Mr. FX Watanabe, who
told reporters in Sydney that the unwinding of carry trades are having a limited
impact on the currency, which was previously a rumor cited for Fridays yen rally.
Meanwhile, Japanese fixed income markets responded swiftly to a 2.3 percent drop in
the Nikkei 225 stock average which felt the effects of low expectations for upcoming
banking sector earnings.

Bonds – Japanese 10-Year Government Bond Futures

Fixed income markets had little economic data to respond to today. However, 10-year
JGBs jumped to 101.139 as yields dropped to 1.680% over the course of a few
hours. Traders fled to safety as the Japanese benchmark equity index plummeted on
weak earnings expectations out of the banking sector. With JGBs ended the day
higher, prices staged a more bullish curve steepening amidst a lack of major
economic data in this holiday-shortened week, as Japans financial markets will be
closed Thursday for the Thanksgiving holiday.

FX – EUR/JPY

Yen has softened against all of the 16 most active currencies today as the G-20
statement only referred to œensuring appropriate exchange-rate flexibility,
stopping short of citing the yen's marked depreciation against the euro.
Additionally, yen had posted solid gains last Friday amidstrumors that a large hedge
fund had to unwind its large carry trades after its long oil/short yen position
began to blow up. However, Hiroshi Mr. FX Watanabe dispelled the buzz when he
commented that the unwinding of carry trades is only having a limited impact on the
currency. With little economic data out of Japan to speak of, EUR/JPY surged to an
eight year high of 151.66 while USD/JPY gained to 118.19 from Fridays low of
117.48.

Equities – Nikkei 225 Index

The Japanese stock market declined sharply as the Nikkei 225 index dropped below the
16,000 level for the first time in a week to 15,725.94. Meanwhile, the Topix fell
2.5 percent to 1,533.94, its lowest close since July, while the Mothers market of
smaller growth stocks plummeted 6.2 percent to its lowest close of the year at
1,022.54. Weakness in equities was the result of fears that banks may have
experienced slower growth in their core lending business, with Mizuho Financial down
3.1 percent to 823,000 yen and Mitsubishi UFJ, the worlds biggest bank by assets,
down 2.8 percent to 1,380,000 yen. Falling crude prices near 17-month lows knocked
shares of Japans largest upstream oil company, Inpex Holdings, down by 3.4
percent to 902,000 yen. Asian markets may also have been hit by comments from Taizo
Nishimuro, head of the Tokyo Stock Exchange, as he said that one reason behind
recent share price falls was the impending end to tax breaks on Japanese shares.

Kindest Regards,

Terri Belkas
Forex Capital Markets LLC
New York, NY 10005
Tel (212) 897-7660
Fax (212) 897-7669
Toll Free 888-503-6739
tbelkas@dailyfx.com

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