The Japanese yen is much stronger today. While the yen was flat immediately following yesterday's Bank of Japan meeting, the currency has since strengthened. The yen is higher against all major global currencies, but is particularly strong against the US dollar. USD/JPY is now below 110.0. While the Bank of Japan emphasized a continuation of the status quo, traders are betting that the institution may tighten monetary policy in the near future. The BoJ upgraded its outlook on inflation from "weak" to "stable", a sign that its significant asset buying program may be unwarranted. Looking at the latest economic data, the trade balance was lower than expected. On the other hand, strong Nikkei manufacturing PMIs and sentiment data suggest a sunny outlook for GDP growth in near future. Our medium-term outlook on the yen remains neutral.
USD/JPY is currently trading above 109.80. EUR/JPY is currently down and trading above 135.30.
Looking at economic data this week, markets will be watching the BoJ event as well as upcoming inflation figures. On Monday, the Reuters Tankan survey accelerated to an 11-year high (35). The BoJ meeting contained few new surprises. Governor Kuroda emphasized that the status quo was set to continue. Japanese merchandise trade balances fell below estimates (¥86.6b vs. ¥261.7b expected). The leading economic index (108.3 vs. 107.7 expected) was higher than estimates. Tomorrow, we'll see cross-border stock and bond investments. Finally on Friday we'll see inflation figures. We'll also see the BoJ's minutes. Governor Kuroda is also scheduled to speak on Friday. Last week, cross-border investments showed continued inflows into Japan.
As the yen strengthens, we are upgrading the yen to bullish in the short-term. Note that the currency is currently trading within normal conditions, based on technical indicators on the daily chart.
As the yen strengthens, 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.