The Japanese yen is mixed this morning. The currency is up against the US dollar, while selling off against the euro and the British pound. The yen is also gaining against commodity currencies including the Australian dollar and the Canadian dollar. The biggest move today is in EUR/JPY, after ECB minutes suggested that the Bank would communicate a change in its policies in early 2018. Thanks to monetary tightening expectations, the euro is strengthening accordingly. While the yen has been fairly strong this week after the Bank of Japan stopped buying long-dated Japanese government bonds, the currency has reversed course today. As Japan has the weakest growth and inflation among developed countries, the consensus expects the Bank of Japan to taper its asset buying program in 2019 at the earliest. Our medium-term outlook on the yen remains neutral.
USD/JPY is currently trading above 111.10. EUR/JPY is currently up and trading above 134.60.
This is a fairly light week for economic data relating to the yen. Consumer confidence ticked down to 44.7 vs. 44.9 in the previous month. Foreign reserves ($1,264.3b vs. $1,261.2b previously) were higher than the previous print. The leading indicator (2.1 vs. 0 prior) and the coincident indicator (1.7 vs. 0.2) were also above previous figures. Cross-border stock (¥597.9b) and bond (¥173.0b) investments continue to show net inflows into Japan. The Eco-Watchers outlook survey (52.7 vs. 53.5 expected) was weaker than expected. Last week, manufacturing and services PMIs missed expectations.
As the yen strengthens thanks to changes in the Bank of Japan's policies, we are upgrading the yen to bullish in the short-term. Note that the currency is trading within normal conditions, based on technical indicators on the daily chart.
As the yen strengthens on weak inflation data, 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.