The yen continues to sell off this morning, and is particularly weak against the US dollar. Looking at bonds, US and German government bond yields are rising this morning. Unsurprisingly, the yen is fairly weak against the US dollar and the euro. Looking at data from Japan, services PMIs were slightly weaker than the previous figures. As we have written before, the yen is particularly sensitive to global bond yields given the Bank of Japan's yield curve control program. As commodity prices remain elevated, the outlook for inflation supports higher yields and the yen is likely to stay weak as a result. Our medium-term outlook on the yen remains bearish.
USD/JPY is currently trading above 113.20. EUR/JPY is currently up and trading above 136.40.
This is a fairly light week for economic data relating to the yen. Nikkei manufacturing PMIs missed expectations slightly (54.2 vs. 54 expected). Services PMIs were slightly lower compared to the last print (51.1 vs. 51.2 expected). Prior to the holidays, the last Bank of Japan meeting was largely a non-event. Many had believed that Governor Kuroda would signal a change of monetary policy at the last meeting, but this did not occur.
As the yen sells off on hopes for US tax cuts, we are downgrading the yen to bearish. 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.