The Japanese yen is mostly stronger today after weakening yesterday. After the S&P 500 ended the day higher yesterday, the yen weakened as the stock market rout appeared to come to an end. Today, Asian stock markets were fairly weak, and there are lingering fears that the rout is not over. The Nikkei 225 ended very slightly higher, while Hong Kong's Hang Seng Index continued to weaken. As a safe haven asset, the Japanese yen tends to strengthen during time of peril. In many ways, the yen is the ultimate haven as it tends to strengthen even against other safe havens such as the US dollar. Looking at USD/JPY, the pair is down today. Looking at news, the leading indicator missed expectations, but remains in positive territory. Our short-term and medium-term outlook on the yen remains bullish.
USD/JPY is currently trading above 109.20. EUR/JPY is currently down and trading above 134.810.
Looking at Japanese economic data, this is a fairly light week. Services PMIs (51.9 vs. 51.1 expected) were ahead of expectations. The leading index (107.9) and the coincident index (120.7) both suggest the expansion is set to continue. Tomorrow, we’ll see cross-border stock and bond investments. Last week, stock and bond cross-border investments turned negative for the first time in many weeks. This suggests that capital is now flowing out of Japan.
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.