The Japanese yen is fairly mixed today. The currency is flat against the US dollar and the euro, while rising against the Australian dollar. Thanks to an improvement in risk sentiment, the yen is no longer appreciating. Earlier this week, the currency strengthened after US FOMC minutes caused a significant sell-off in equities and commodities. As a safe haven currency, the yen tends to appreciate during downturns while weakening when global risk appetite rises. Turning to Japanese economic data, reactions in the yen were muted following recent inflation figures (which met expectations). As the Bank of Japan remains committed to its easy-money policies, expectations for monetary tightening remain fairly weak. As Governor Kuroda as been appointed to a second term, few expect the BoJ to make significant changes this year. Our short-term and medium-term outlook on the yen remains bullish.
USD/JPY is currently trading above 106.80. EUR/JPY is currently flat and trading above 131.580.
Looking at Japanese economic data this week, markets will be focused on trade balances and the national consumer price index. Export growth (12.2% vs. 10.3% expected), import growth (7.9% vs. 8.3% expected) and the merchandise trade balance (-¥943.4b vs. -¥1,002.0b expected) were all ahead of expectations. The Reuters Tankan survey (29 vs. 35 prior) was lower than the previous print. Nikkei manufacturing PMIs (54 vs. 55.2 expected) missed estimates while the all-industry activity index (0.5% MoM) met estimates. Cross-border stock (¥127.1b) and bond (¥-553.1b) investments continue to suggest net inflows into the country. The national consumer price index (0.9%) met expectations. Last week, GDP growth numbers missed estimates by a significant degree.
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.