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USD/JPY Remains Vulnerable If US Data is Weak – Deutsche Bank
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USD/JPY Remains Vulnerable If US Data is Weak – Deutsche Bank
Taisuke Tanaka, Strategist at Deutsche Bank, suggests that the recent
international securities flow data indicate that the USD/JPY is being
supported by dip-buying by pensions and other Japanese investors.
Key Quotes
“We
believe they will continue to seek foreign-bond buying opportunities in
the new fiscal year due to insufficient returns under the negative
interest rate policy (NIRP). When the economy and markets are calm at
home and abroad, the USD/JPY may be underpinned to an extent by overseas
investment by Japanese.
However, the USD/JPY has recently shown
virtually little reaction to favorable factors such as BoJ easing or
strong US indicators such as payrolls. Prime Minister Shinzo Abe, facing
a Upper House election in July, may decide in late May or early June on
an economic stimulus package and whether or not to postpone the
consumption tax hike scheduled for April next year. This could provide
some support for the USD/JPY from the positive impact on domestic share
prices, but the effect is likely to prove very modest.
We do not
foresee any decisive comeback in the rate until the markets gain more
confidence in the sustainability of both the US economic recovery and
global risk-on sentiment. The USD/JPY remains vulnerable if US data is
weak, a drop in share or oil prices, or Chinese concerns should emerge
before that time.
Few major indicators are due this week in the
US. The market focus is likely to be China's foreign reserves and the
dialogue between Fed Chair Janet Yellen and previous Fed chairmen today.
In Japan, March international securities flow data on Friday should
reveal which investors are actively buying foreign assets.”
(Market News Provided by FXstreet)