JPY: Undermined overnight by the higher oil price - MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the yen has been undermined overnight by the higher oil price which reflects number of factors.

Key Quotes

“Firstly, the higher price of oil has helped to improve investor risk sentiment lifting global equity markets particularly shares of energy companies. Secondly, a higher oil price if sustained would lead to deterioration in Japan’s terms and trade and narrowing of their trade surplus reducing support for the yen. Thirdly, if the price of crude oil was to rebound more materially it would help to lift inflation expectations in Japan and weaken the yen. However in light of our outlook for only a modest further rebound in the price oil, we do not believe that it justifies dovish shift in our outlook for the yen.”