The US market was closed on the President Day while European stock weakened as the ECB President Draghi cautioned of risks to economic outlook in the Eurozone. Japanese yen continued its slump, now at the lowest level in 33 months, after the G-20 shrugged off the risks of currency war. Moreover, the market was moved by conflicting comments from Japanese official. In the commodity sector, the front-month contract plunged to a 4-day low of 95.21 before settling at 95.86 before settling at 95.86, down -1.49% while the Brent crude contract slipped -0.24%. Gold price remained fragile with the benchmark Comex contract losing for the third consecutive day to as low as 1596.7 before ending the day at 1609.5, down -1.59%.
In a speech at the European Parliament, the ECB President Draghi addressed the competitive depreciation of foreign exchange rates. He stated that "most of the exchange rate movements that we have seen were not explicitly targeted, they were the result of domestic macroeconomic policies meant to boost the economy. In this sense, I find really excessive any language referring to currency wars". He believed that both the nominal and real exchange of the euro has remained around its long-term average. Concerning the economic prospect, Draghi forecast that "economic weakness in the early part of 2013 is expected to be followed by a very gradual recovery later in the year" but he warned that "considerable further efforts are needed to ensure that Europe continues emerging from the crisis".
The BOJ's minutes for the January meeting indicated that a few members were reserved about the upgrades of Japanese economic outlook. Meanwhile, 2 BOJ members expressed that extending the maturity of BOJ bond buys was an option. Yet, the minutes were overshadowed by comments from policymakers. Japanese Finance Minister Taro Aso stated that the government has no plan to buy foreign bonds. His comments contradicted with Prime Minister Shinzo Abe who reiterated that buying foreign bonds "exists as one idea". The next focus is the upcoming BOJ governor. News headlines stated that Toshiro Muto, a less dovish candidate than Haruhiko Kuroda or Kazumasa Iwata, is the leading candidate for the post. Abe stressed that he expects the governor to reflect the government's determination to beat deflation. Abe stated that "it would be necessary to proceed with revising the BOJ law if the central banks cannot produce results under its own mandate".
The RBA minutes released in Asian session unveiled that recent rate cuts have shown effects in boosting the economy while benign inflation might trigger further rate easing. Regarding developments in China and Japan, the minutes stated that "a wide range of indicators showed that growth in the Chinese economy had stabilized, underpinned by public spending and somewhat stimulatory financial policies... There had also been indicators of stronger growth of domestic demand" in East Asia with the exception of Japan.
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