Kicking off in Asia, FX trading has been particularly choppy this morning due to the lack of any true economic drivers. The limelight news in Asia today is coming from Japan. Japan's Prime Minister Hatoyama is stepping down after just nine months in power - a move speculated to help support his party, the DPJ, build support before the next upper house election. DJP party leaders announced that a replacement would be named on Friday, with rumors by the press that Finance Minister Kan is to be tapped. Normally, political uncertainty will weigh on a currency, but with US yields continuing to contract and the EU debt crisis, the world's 2nd largest economy will continue to attract risk-averting capital in the near term. The JPY may soften briefly as pundits shout from their pulpits, but the macro environment is still favoring the Yen. Mid-term, we suspect that the JPY will come under significant selling pressure and the elevation of Kan to Prime Minister could be a trigger. Kan has been very vocal about his desire to see the BoJ do more to fight deflation and bolster the exporting nation's weak economic growth - both ends which could be met actively trying to inflate the Yen. He hasn't minced any words that he perceives a weaker JPY as good for Japan and even going as far as calling for the JPY to trade at 95 against the USD. In Europe, the bonds and CDS markets continue to highlight the concern the market holds over the Eurozone. Spanish and German 10yr yield spread are now trading at their highest levels since the rescue package was announced while CDS spreads in PIGS nations have resumed their uptrend. Yesterday the ECB report stated that EU banks might write-down an additional €195 bn and that purchases in the secondary bond markets would increase by a 34%. The ECB's Noyer declared that the EURUSD is on par with its 10-year average and is not historically weak, thus slashing any hopes of an ECB intervention. There have been accusations by the German media that the bond program is enabling French banks to dump toxic Greek debt - something which the ECB's Trichet is adamantly denying. German banks are commited not to sell Greek bond untill 2013, unlike French banks which are under no obligations to hold the debt. This arguement between the ECB and the Deutsche Bundesbank over purchasing of goverment bond will only increased already stressed national tensions. There is a growing consensus among market participants that the Euro still has further downside - but, the silver lining is that the depreciation of the Euro may be the easiest way to increase EU growth. This idea, which would potentially save the Euro-zone by jump starting growth, could be achieved only if the Euro fell, and fell far. On a final note in North America, the BoC became the 3rd G10 central bank to raise rates since the global recession began. Although the accompanying statement sounded rather dovish, citing uneven recoveries among leading nations, it remains to be seen if there will be a pause in the policy rate path. We view Canadian prospects as positive and suspect tightening will continue as economic data outperforms, making the CAD a highly attractive buy.

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