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The yen took cues from bond yields and overall risk sentiment last week. With no major data coming up, will risk sentiment dictate its price action again?

Lower-tier reports

There are no major economic releases from the world’s third largest economy this week, but we will see lower-tier reports such as cash earnings and leading indicators on Wednesday, bank lending and current account on early Thursday Asian session trading, and tertiary industry activity on Friday.

These reports don’t usually move the yen for long, but keep an eye out for notable hits or misses that might cause a blip or two for the yen!

More BOJ intervention?

The Bank of Japan (BOJ) got busy last week when Japan’s JGB yields inched uncomfortably away from the central bank’s 0.0% target. Not only that, but USD/JPY was hanging on to its teeth before a positive NFP report boosted it higher.

Will BOJ take a chill pill this week? Or will it make more efforts to weaken the yen even as the dollar’s prospects improve?

Last Week’s Price Review

The yen is the second weakest currency of the week after the Aussie (as of 9 am GMT).

Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart
Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart

And from the looks of it, the yen appears to have resumed taking directional cues from bond yields since yen pairs (other than AUD/JPY) were roughly tracking the rise in bond yields this week.

And the rise in bond yields, in turn, was attributed by market analysts on reinforced expectations that the Fed will continue to hike this year, as well as higher expectations that the ECB will be tightening monetary policy sooner or later.

Other than bond yields, the yen also appears to have taken directional cues from risk sentiment since bond yields rose from the get-go but the yen was resilient at first, likely because risk aversion was the dominant sentiment on Monday and Tuesday.