The Japanese yen is mixed today. While the currency is weakening against the US dollar, the yen is flat against the euro and the British pound. Looking at global bond yields, falling German and US government bond yields are having a limited impact on the yen today. Typically, the yen broadly strengthens when global interest rates fall. Instead, the yen is mostly trading as a function of today's US dollar rebound and monetary policy expectations. Last week, traders bought the yen after the Bank of Japan tapered purchases of long-dated Japanese government bonds. Many saw the move as a prelude to tighter monetary policy in the future. 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 135.370.
This is a fairly light week for economic data relating to the yen. The All Industry activity index was ahead of expectations (1.1% vs. 0.4% forecast). Tomorrow, 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.