USD/JPY higher on speculation about Japan election

•     Dollar generally lower in thin trading owing to US holiday

–    No apparent reason for USD’s general decline

•     USD/JPY higher on speculation about Japan election

–    Talk is that Abe may call election as a referendum on the next hike in the consumption tax, delay hike for 1 ½ years. Delay in hiking tax seen as good for growth

–    Japan stocks high 7-year high. Higher Japan stocks = higher USD/JPY

–    How high can $/¥ go? It used to be overvalued by 37%. With current account surplus falling, it could now be undervalued by 37%. That’d be ¥140. ¥130 seems possible.

•     NZD rises on possible future rate hike

–    RBNZ financial stability report repeats comments about NZD being overvalued, but says rates may need to rise again “in coming years”

•     Today:

–    Eurozone: Industrial production for Sep expected to be up mom, but this probably won’t be enough to reverse negative sentiment towards EUR

–    UK:  Unemployment rate expected to decline, average earnings to rise, which could give GBP a boost. BoE inflation report to bring new forecasts for growth, inflation

–    US: Wholesale inventories for Sep expected to decelerate