The Japanese yen is weaker against all major currencies today. The yen is currently the weakest against the US dollar and the British pound. While the yen strengthened after Japanese Prime Minister Abe's wife (Akie) was implicated in a possible corruption scandal, the yen has entirely reversed course today. We described the issue in more detail in yesterday's edition of the yen daily update. While are no significant developments related to the scandal, the yen is weakening as hopes rise for accelerating US inflation. The year-over-year consumer price index for February is forecast to accelerate to 2.2% from 2.1% previously. As growth and inflation accelerate in tandem, there are rising fears that the US Federal Reserve may raise interest rates more than three times this year. Given the Bank of Japan's relatively looser monetary policies, the yen is likely to weaken if US inflation is higher than expectations. Our short-term and medium-term outlook on the yen remains bullish.
USD/JPY is currently trading above 106.90. EUR/JPY is currently up and trading above 131.760.
Looking at Japanese economic data this week, we'll see the BoJ's minutes and machinery orders. The MoM tertiary industry index (-0.6% vs. -0.2% expected) was below consensus expectations. Tomorrow, the most important day, we'll get the BoJ's meeting minutes and machinery orders for January. On Thursday, we'll see cross-border stock and bond flows. On Friday, we'll see industrial production and capacity utilization. Last week, sentiment surveys pointed to decelerating growth while the Bank of Japan maintained the status quo.
As the yen strengthens, we are upgrading the yen to bullish in the short-term. Note that the currency is trading within a normal range, 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.