In view of its safe haven status, it is unsurprising that the JPY has softened in response to the historic summit between N. Korea leader Kim Jong-un and US President Trump, suggests Jane Foley, Senior FX Strategist at Rabobank.
Key Quotes
“In comparison to the palpable tension that existed last year between the two nations, the markets have concluded that the investment environment has improved as a consequence of today’s meetings.”
“Japanese officials have made a strong attempt to make their voices heard ahead of today’s summit. Ahead of last weekend’s G7 meetings, PM Abe met with Trump to stress the importance to the Japanese people of any agreement made regarding security arrangements in the Korean peninsula.”
“From a market perspective the power struggle between the US and China is being marked mainly by a series of trade spates. This, however, is part of a series of events which are illustrative of China’s growing ambitions.”
“From a longer-term perspective, today’s summit thus raises more questions than answers. In the near-term, however, it has lessened demand for the safe haven yen which is likely to be welcomed by the BoJ.”
“There is little expectation that the BoJ policy meeting at the end of the week will do any other than be an opportunity for the central bank to reinforce its commitment to its huge QQE programme.”
“Inflation remains weak and there is speculation that policy makers could downgrade its price forecasts in the June or July meeting for FY2018 and beyond following the soft April data release. This would be taken by the market as a dovish policy message which could reinforce today’s better tone in USD/JPY. We expect USD/JPY to hold around the 100 level on a 3 mth view.”
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