The Japanese yen is weaker today against the US dollar and the euro, while flat against most other currencies. Last week, the currency appreciated sharply after Governor Kuroda claimed that the Bank of Japan is approaching its inflation target at the World Economic Forum in Davos, Switzerland. While Kuroda was mostly repeating what he had stated earlier, yen traders remain alert for any signs of monetary tightening. Today, the yen is weakening as US and Eurozone bond yields strengthen. 10-year US government bonds are currently yielding 2.712% while 10-year German government bonds have strengthened to 0.655%. The yen is fairly sensitive to interest rate differentials given the Bank of Japan's "yield curve control" program. Last week, Kuroda stressed that the program is set to remain in place for the foreseeable future. Our short-term and medium-term outlook on the yen is bullish.
USD/JPY is currently trading above 108.90. EUR/JPY is currently up slightly and trading above 135.0.
This is a fairly light week for economic data relating to the yen. On Tuesday, we’ll see the unemployment rate, household spending and retail sales. On Wednesday, we’ll see the BoJ’s projections for inflation and GDP growth. We’ll also see industrial production, construction orders and housing starts. On Thursday we’ll get cross-border stock and bond investments. Last week, the yen strengthened after Governor Kuroda signaled no change in the Bank of Japan’s monetary policies.
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.