Forex Flash: FX volatility eyes Chinese headlines – UBS

Overnight, Chinese equities reacted badly to a series of property tightening measures announced by Chinese authorities on Friday evening. In particular, the fallout dragged the AUD/USD down to an 8-month low of 1.0119. The National People's Congress takes place this week, raising the risk of further headline-induced FX volatility. Meanwhile, BoJ Governor-nominee Kuroda spent the overnight session outlining his monetary policy views during a parliamentary confirmation hearing (see feature article below).

The two deputy governors proposed by the Abe-administration (Kikuo Iwata and Hiroshi Nakaso) have their turn on Tuesday. The government's ambition is to have all three nominations confirmed by both houses of parliament by March 15th, well before their first policy decision on April 4th.

Elsewhere, Fed Chairman Bernanke again rejected the idea of cutting short QE3 before the labor market shows substantial improvement. According to Research Analyst Gareth Berry at UBS, “he dismissed fears that a 1994-style bond selloff could be brewing, arguing that the Fed's communication tools are far superior now than they were then – we would not be surprised to hear Vice Chair Yellen echo these sentiments later today.”