USD/JPY: Yen remaining under upward pressure – MUFG

Analysts at MUFG Bank, point out the Japanese Yen continues to be supported by heightened global growth concerns. They see the USD/JPY pair trading between 106.00/109.00 over the next days. 

Key Quotes:

“USD/JPY is testing the 107.00 level again and we see the yen remaining under upward pressure. The 10-year spread has been moving in favour of yen appreciation and the announcement this week by GPIF that it would start treating hedged foreign bonds as domestic bonds will open up scope for a further shift away from JGBs in favour of foreign bonds. The foreign bond holding of 18.1% is close to the max 19% limit. Fears of less JGB GPIF demand led to a poor JGB auction yesterday and higher yields relative to UST bonds – a narrowing spread will only help reinforce yen support.”

“The USD rally at the end of the quarter was mixed with JPY buying among exporters. Financial institutions are taking gains and reshuffling their portfolios at the start of the new quarter, and JPY rates have risen. But the rise has been limited, given mixed USDJY flows. US jobs data will be closely watched this week, while next week features the BoJ Branch Managers’ meeting and the regional economic report.”

“The BoJ is not expected to expand monetary easing measures by digging deeper into negative interest rate territory at this month’s meeting, but given the unpredictability, its tone will be important to watch.”