The Japanese yen continues to strengthen today. The currency has been strengthening following the latest Bank of Japan meeting earlier this week. While Governor Kuroda's comments contained few indications regarding future monetary tightening, the yen continues to rally. Looking at bond yields, most global bond yields are falling today. 10-year US government bonds are now yielding 2.63% vs. 2.65% earlier today. Given the yen's sensitivity to interest rate differentials, the currency is strengthening as a result. 10-year Japanese government bond yields are fixed at 0% via the Bank of Japan's yield curve control program. Looking at the latest economic data, cross-border investments continue to drive net inflows into the country. We will upgrade our medium-term outlook on the yen to bullish later today.
USD/JPY is currently trading above 109.0. 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. Cross-border stock (-¥148.2b) and bond (¥411.1b) investments show net inflows into Japan. 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 looking overbought, 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.