The Japanese yen continues to sell off against all major currencies. The yen is currently the weakest against the euro and the Canadian dollar. Yesterday, the yen was weaker against most major currencies including the US dollar and the euro. As global bond yields continue to strengthen, the yen is moving down as a result.
Beyond the impact of higher crude oil prices, bond yields moved up yesterday (particularly in the Eurozone) thanks to recent comments from ECB speakers. As we wrote in today's euro daily update, 10-year German bunds moved up after Bank of France Governor Villeroy de Galhau suggested that the ECB could normalize interest rates "quarters", not years, after ending its quantitative easing program. Given the yen's sensitivity to interest rates during "risk-on" periods, the currency moved lower in response to higher yields. So far, elevated growth (particularly in the US) and accelerating inflation means that investors continue to chase riskier investments. As a result, yen weakness is likely to continue in the short-term. In the longer-term, we expect the yen to enter a bullish trend once sentiment turns over the coming weeks. Our short-term and medium-term outlook on the yen is bearish.
USD/JPY is currently trading above 109.80. EUR/JPY is currently up and trading above 131.0.
In this week’s Japanese yen economic calendar, we’ll see growth and inflation data. The YoY domestic corporate goods price index for April (2%) met expectations. Tomorrow, we’ll see Q1 GDP growth as well as industrial production and capacity utilization for March. On Thursday, we’ll see weekly foreign bond investments and foreign investments in Japanese equities. We’ll also see machinery orders for March. On Friday, we’ll see the national consumer price index for April (as well as ex-food and energy CPI). Last week, Japanese wage growth accelerated above expectations.
As the yen trades weakens, we are now bearish on the yen. 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.