The Japanese yen is mostly weaker today - the yen is currently the weakest against the Australian dollar. Yesterday, the currency was also weaker as global risk sentiment rebounded. Thanks to positive developments relating to North Korea and limited US-Japan trade tensions, the yen is selling off.
As we wrote in our US dollar daily update, fears of elevated trade tensions between the US and Japan have failed to pan out. Instead, the two countries are working on a bilateral proposal in order to increase trade and investment. While Prime Minister Abe has pushed to restart TPP talks, Trump has signaled that he prefers bilateral agreements. In North Korea-related news, Trump signaled his intent to meet Kim Jong-un, but is willing to walk away if talks are not productive. As North Korean tensions ease while risk sentiment improves, the Japanese yen is selling off as a result. Our short-term outlook on the yen is neutral, while our medium-term outlook on the yen remains bullish.
USD/JPY is currently trading above 107.20. EUR/JPY is currently up slightly and trading above 132.90.
Looking at Japanese economic data this week, important data releases include the trade balance and inflation figures. YoY February industrial production (1.6% vs. 2.3% expected) missed consensus estimates while February capacity utilization (1.3% vs. -0.3% expected) was better than estimates. The adjusted trade balance for March (¥119.2b vs. -¥98.5b expected) was better than consensus estimates. Foreign investment in Japanese equities (+¥308.3b) and Japanese investment in foreign bonds (+¥797.6b) both signal outflows from Japan. Tomorrow, the most important day, we’ll see the YoY national consumer price index for March. Last week, the Eco-Watcher Survey results were below consensus expectations.
As the yen runs out of steam, we are now neutral on the yen in the short-term. Note that the currency is trading within a normal range, based on technical indicators on the daily chart.
As the yen strengthens, we are upgrading the yen to neutral. Looking at the yen on a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators when looking at a weekly chart.