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Japanese yen down sharply on North Korean hopes

Japanese yen daily update

BY DEB SHAW | 

Japanese yen daily update

The Japanese yen is weakening today thanks to hopes for a North Korean peace deal. Looking at the yen against its major global peers, the currency is the weakest against the Australian dollar, the Canadian dollar and the British pound. AUD, CAD and GBP are the most risk-sensitive (i.e. "high beta") currencies. As the perceived threat from North Korea falls, global risk sentiment is improving as a result. Last night, President Trump  tweeted that "great progress" is being made, while a meeting is being planned between Trump and North Korean leader Kim. No US President has ever met with a North Korean leader. As a safe haven currency, the yen tends to weaken on positive developments. Turning to the Bank of Japan, the recent BoJ event and press conference had a limited reaction on the yen. Governor Kuroda maintained the status quo, and stated that policy will be geared towards achieving the Bank's 2% inflation target. Our short-term and medium-term outlook on the yen remains bullish.   

USD/JPY is currently trading above 106.70. EUR/JPY is currently up and trading above 131.380.

Looking at Japanese economic data this week, we'll see Q4 GDP figures and hear from the Bank of Japan. Markit services PMIs missed expectations (51.7 vs. 52 expected). The leading economic index (104.8 vs. 106.2 expected) was below consensus estimates. Cross-border stock (-¥463.4b) and bond (-¥1,188.5b) investments suggest continued inflows into Japan. Q4 GDP (1.6% vs. 0.9% expected) was revised up. The current account (¥607.4b vs. ¥310.0b) was better than expected. The Eco-Watchers survey (51.4 vs. 52.8 expected) suggested decelerating future growth. Tomorrow, we'll see inflation for January. Governor Kuroda maintained the status quo. Last week, manufacturing PMIs remained healthy while industrial production contracted. 

Updated 
Short term outlook
Bearish
Medium term outlook
Bearish

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