The Japanese yen is mostly stronger this morning. The currency is gaining against the US dollar and the euro, while selling off against the Australian dollar. In the past few sessions, the yen has been notably stronger despite limited moves in global bond yields. Historically, the value of the yen has been closely correlated to yield differentials. After the Bank of Japan tapered its purchases of long-dated Japanese government bonds last week, the yen has been rallying in anticipation of tighter monetary policy. While the BoJ has denied any intention to change its current monetary policy, traders are betting that the 'yield curve control' may be nearing its end. Either way, the BoJ is not expected to make its intentions public until the European Central Bank has communicated its normalization plans. Our medium-term outlook on the yen remains neutral.
USD/JPY is currently trading above 110.60. EUR/JPY is currently down and trading above 135.250.
This is a fairly light week for economic data relating to the yen. On Tuesday we'll get the All Industry activity index. On Wednesday we'll see machinery orders. On Thursday we'll see cross stock and bond investments. Last week, cross-border investments continue to show net inflows into the yen.
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.