This morning, the yen is strengthening against both the US dollar and the euro. As global bond yields fall, the yen is strengthening as a result. Given the Bank of Japan's 'yield curve control' program, 10-year Japanese interest rates are set to 0%. Thus the currency is highly sensitive to the difference in 10-year rates between the yen and foreign currencies. Looking at news, rates fell yesterday following House Ways and Means Committee Chairman Brady's criticism of the Senate tax plan. As doubts regarding US tax reforms rise, global bond yields continue to fall today. Our outlook on the yen remains neutral, and the currency continues to trade within a normal range.
USD/JPY is currently trading below 113.0. Looking at the euro vs. the yen, EUR/JPY is down and is currently trading above 133.30.
This is a fairly slow week for economic data releases relating to the yen. Corporate Goods Price Index numbers were stronger versus expectations (3.4% vs. 3.1% expected). GDP growth figures announced earlier today met expectations (0.3% quarter-over-quarter). Finally on Thursday, we’ll see cross-border stock and bond investments. Last week, Japanese residents continued to buy foreign stocks and bonds.
As bullish momentum runs out of momentum and the yen trades sideways, we are downgrading the yen to neutral in the short-term. Note that the currency is now trading within normal conditions, based on technical indicators on the daily chart.
After rising on lower global bond yields, we are upgrading the yen to neutral. Looking at the yen on a weekly chart, the currency is looking oversold based on various technical indicators. This is based on various technical indicators.