Risk sentiment and bond yields had the most impact on the yen’s price action last week. Will we see a repeat this week? Let’s take a look at some Japanese reports on tap.
Core machinery orders (March 13, 11:50 pm GMT)
The yen doesn’t usually react to economic releases, but the core machinery orders report does tend to move influence its price action for a candle or two (or ten).
Analysts are expecting a 5.3% increase from a year earlier in January, which might not be too crazy considering that we saw an 11.9% drop in December.
Take note that the Bank of Japan (BOJ) is publishing its monetary policy meeting minutes at the same time, though, which could affect the yen more than machinery data would.
BOJ’s meeting minutes (March 13, 11:50 pm GMT)
As expected, the BOJ didn’t make any policy changes in March. Ditto for Kuroda’s presser, which didn’t really tell us anything new.
Let’s see if the meeting minutes will provide more volatility for the yen. Keep an eye out for comments on inflation trends, global trade policies, and possibly a schedule for exiting their stimulus program down the road.
Bond yields and risk sentiment
As mentioned below, the yen mostly took cues from bond yields rather than any single economic release. And that includes the BOJ’s policies!
On this week’s episode stay tuned for updates on global trade policies and any hiccups for Trump’s administration.
Last Week’s Price Review
The yen’s four-week winning streak looks like it will end this week since the yen is currently the second worst-performing currency of the week (as of 9 am GMT).
As usual, yen pairs were taking directional cues from bond yields. And bond yields, in turn, were driven mainly by geopolitical events and risk sentiment.
Bond yields rose on Monday, market analysts say, because of the risk-on vibes at the time due to easing fears of a potential trade war. Bond yields wobbled but were higher for the day on Tuesday because of further risk-taking and dampened safe-haven demand for bonds due to news that North Korea is willing to denuclearize, according to market analysts.
Bond yields eased on Wednesday due to renewed fears of a possible trade war due to news of Cohn’s resignation. However, it’s also likely that the yen received some of those safe-haven flows since the yen found buyers before bond yields started moving lower.
The yen later took directional cues from bond yields, though, weakening when bond yields began to recover as risk sentiment also began to recover.
After that, bond yields steadied on Thursday before sliding, apparently as a reaction to ECB Overlord Draghi’s presser since Draghi tried to present a dovish tune. The slump in bond yields benefited the yen, allowing the yen to recover on most pairs. Although it was roughly steady against the Greenback.
Bond yields would later recovery, though, thanks to the risk-on vibes due to Trump’s openness to sit down and reason together with North Korea.
As a side note, the BOJ announced it monetary policy decision earlier on Friday. That was a dud, though, and the yen opted to take directional cues from bond yields, likely because there wasn’t really anything new. Heck, BOJ Shogun Kuroda even fought back against expectations that the BOJ may start exiting its super loose monetary policy in the not too distant future.