The greenback advanced to multi-month highs against the major currencies despite a week of disappointing US economic data. The dollar surged to a fresh two and a half month high versus the yen, triggering its advance across the board. According to the CFTC IMM futures data, speculators reduced their net longs in the major currencies against the dollar for the week ending September 10th. Speculators halved their net long positions in dollar/yen contracts, falling to 3,220 contracts down from 6,641 a week earlier. Euro/dollar net long contracts fell by 19% to 20,351 contracts, from 25,238 contracts a week earlier. Cable net long contracts fell to 2,023 down from 2,871 contracts the previous week. Meanwhile, USDCHF net long positions edged lower to 10,234 contracts from 10,931 contracts the week before.
In recent weeks Japanese Government officials have issued a barrage of reform initiatives aimed at bolstering the nation's ailing stocks ahead of the first fiscal half. Last week, Japan MoF's Kuroda stated that large-scale yen selling could help end the nation's deflation problem. Most recently, Japan PM Koizumi ordered FSA Minister Yanagisawa to formulate specific measures to accelerate the cleanup of bad loans. Koizumi stated that financial institutions have been unable to regain the public's confidence and will not be able to unless the disposal of bad loans is accelerated. Yanagisawa agreed to speed up discussions of specific measures at the FSA and cautiously affirmed his position toward the idea of injecting public funds into banks to speed up the disposal of bad loans. PM Koizumi is expected later this week to unveil his economic package aimed at revitalizing Japan's economy. The proposed reform measures are expected to focus on stabilizing the financial system, including the disposal of bad loans. The Bank of Japan will hold its monetary policy meeting this week. Many have suggested a need for the Bank of Japan to further ease their already lax monetary policy. Although this seems unlikely, a Kyodo News poll last week showed that 30% of economists expect the BoJ to ease credit within 3 months. //www.forexnews.com