“USD/JPY has been buoyed by Donald Trump’s ability to avoid being severely damaged by the news agenda and the continued rise of US equities,” ING analysts note.
Key quotes
“Fed Chair Powell’s comments at Jackson Hole should also contribute to further US yield curve flattening with further gradual Fed hikes expected later this year. As we’ve noted before we think a flatter US yield curve is a positive for USD/JPY as Japanese investors find it too expensive to FX hedge purchases of US Treasuries. It may not be until the market were ever to question the need for two further Fed rate hikes this year that USD/JPY would start to correct lower.”
“In Japan, we’ll see data on consumer confidence, retail sales and Industrial Production this week. The latest run of CPI data showed inflation still running at 0.9/1.0% YoY and not really providing any urgency about the need for BoJ to exit super-loose policy. What could come into focus over coming weeks, however, is the LDP leadership election. Were fears to build that Abe could be ousted, we’d see that as a JPY positive on the view that super-reflationary Abenomics policies could be curtailed.”
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