In our last commentary on the Japanese yen, we wrote that the currency was looking excessively weak against the euro. In particular, we stated that bullish catalysts driving EUR/JPY were at risk as speculator positioning in both long euro and short yen trades were looking extreme. In addition, we flagged changes to the Bank of Japan’s “yield curve control” program as a potential risk for yen stre…

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Tags: Japanese yen

In early 2017, doubts regarding the integrity of the Eurozone led many to take refuge in the Japanese yen. Unlike the euro, the Japanese yen exhibits classic safe haven characteristics and tends to strengthen during downturns. Following the Brexit referendum vote and US presidential elections, few were willing to bet on opinion polls that predicted Macron’s victory. Similar to political events in…

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Japan has suffered from weak growth and inflation since the global financial crisis, and the Bank of Japan has frequently experimented with unorthodox monetary policies. In September 2016, the BoJ decided to directly target long-term interest rates. The so-called “yield curve control” (YCC) program fixed 10-year Japanese government bond (JGB) yields at 0%. If yields deviated from the BoJ’s target…

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As the Bank of Japan is one of the world’s most dovish central banks, market expectations for this week’s upcoming event are very limited. Governor Haruhiko Kuroda, who has overseen a $4T quantitative easing program and negative interest rates over his 5-year term at the Bank, is an unlikely candidate to bring about hawkish monetary policies. This is especially the case as domestic inflation rema…

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As expectations for tax cuts rise this week, the yen is taking the news in stride. Previously, we had argued that the yen was set to weaken given strength in crude oil and potential US tax cuts. In an environment where GDP growth is strengthening, an upturn in inflation expectations usually leads to a stronger US dollar (as markets price in additional rate hikes). As both rising crude oil and tax…

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Looking at this week’s COT report, extremes include the Swiss franc, crude oil and a new bearish extreme in the Japanese yen. Notable extremes are bolded, and are highlighted when speculator positioning is more than two standard deviations above historical trailing 1-year and 3-year trends. The last t…

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Ever since both crude oil prices and inflation expectations bottomed last summer, our view on inflation has become more bullish. Crude prices look set to keep rallying for the rest of the year, while inflation expectations can keep rising thanks to tax reform hopes. Given the Canadian dollar’s historical correlation with crude oil, the currency is likely to be supported by rising crude prices. On…

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USD to Yen: Abe's landslide election win bodes well for the yen, but future inflation and higher interest rates make the US dollar the one to bank on.

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The extremes in this week’s CFTC data are the same as last week: long euro, British pound and Canadian dollar positions and short US dollar. This is shown below. Notable extremes are bolded, and are highlighted when speculator positioning is more than two standard deviations above historical trailing 1-year and 3-year…

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Tags: Japanese yen

While Yuriko Koike’s Party of Hope was launched with much fanfare a few weeks ago, momentum behind the new party has run out of steam. Koike recently declined to leave her current role as the Governor of Tokyo, which would be required if she were to run in national elections. This has led to voter confusion, as the leadership behind the new party is unclear with Koike out of the picture.

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Tags: Japanese yen