Another week, another chance to trade the yen as a safe haven? Here are the catalysts that might move the low-yielder this week.
Japan’s data dump (June 28, 11:30 pm GMT)
On Thursday we’ll see the world’s third largest economy print Tokyo’s core PI, unemployment rate, and its preliminary industrial production.
While these reports don’t tend to move the yen for long, they could cause a wiggle or two if they print significant hits or misses. Of course, it also helps that there won’t be any top-tier reports printed at the same time of the releases.
Overall risk sentiment
As you can see below, the yen got most of its gains from its safe haven status last week.
The picture looks pretty similar this week with no major data scheduled from Japan. We know that the BOJ has scrapped its “deadline” for hitting the 2.0% inflation target, so top-tier reports are unlikely to put pressure on Kuroda and his team anyway.
Instead, we should pay attention to any news event that might affect overall risk sentiment. Trade war jitters are on top of the list, though shaky support for Merkel, Brexit negotiations, and global oil updates could also cause a wiggle or two for the low-yielding yen.
Last Week’s Price Review
The yen had a good run last week and is currently on the winning side again since it’s the second best-performing currency of the week (as of 8 am GMT).
And looking at the overlay of inverted yen pairs and the benchmark U.S. 10-year bond yield, we can see that the yen was taking directional cues from bond yields (as usual). And the yen harvested the bulk of its gains when bond yields plunged after Trump threatened to impose even more tariffs against China.
Aside from bond yields, risk sentiment also apparently helped to dictate the yen’s price action.
An apparent example is when bond yields rose on Monday, but the yen was mixed but broadly stronger, likely because of the risk-off vibes on Monday.
The yen also very reluctantly weakened on Wednesday, even as bond yields climbed, likely because risk aversion began to prevailed on Wednesday.