Currencies spent an uneventful session in Asian trade on the last working day of the week with EURUSD holding near the highs of the day amidst very little fresh economic news. In Japan the Tertiary Activity index rose 0.4% versus 0.5% while the CPGI measure of inflation declined by -1.4% on a year over year basis as expected.

Japan’s EcoFin Minister Maehara stated that forex intervention was an important MOF prerogative as he tried once again to jawbone USDJPY higher. The pair remains near yearly lows despite stronger than expected labor data out of US last week and yesterday’s much better than forecast weekly jobless claims numbers. The market continues to be dubious about the prospect of US economy acting as an engine for global growth and is still concerned about the fracture of the EZ which is seen as the greatest recessionary risk in 2013.

Therefore it appears that only a meaningful long term resolution the EZ sovereign debt crisis in combination with sustained US growth will lift USDJPY out of its current malaise. On both fronts there is perhaps small cause for optimism as many market observers believe that Spain will ask for formal bailout in the near future thus mitigating default risk while US economy continues to gain momentum albeit at a slow pace.

Today’s University of Michigan sentiment survey will be the primary economic catalyst in North American session and if the data confirms the recent improvement on the labor front it may push USDJPY through the 78.50 back towards 79.00 as case for growth begins to build.

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