Zero Hedge – The US dollar and yen remain soft. The news stream has encouraged the so-called risk-on trade. The Greek debt buyback appears to have gone well enough that it will get dollop of aid. Spain reportedly received 40 bln euros of bank aid. There seems to be a potential compromise banking supervision in Europe. On top of that, of course, the market expects the Federal Reserve to announce an expansion of its quantitative easing later today and keep the door open to further steps if necessary.
The dollar made new eight month highs against the yen, just shy of the JPY83 level. These dollar gains ahead of the FOMC meeting underscores one of our interpretative points that the old drivers of dollar-yen, like interest rate differentials and general risk appetite, have broken down, trumped by Mr Abe and his aggressive monetary and fiscal rhetoric.