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Good week for yen bulls as the ongoing trade war between the U.S. and China continues to drive traders to safe havens like the Japanese yen, despite another round of dovish rhetoric from the Bank of Japan.
Japanese Headlines and Economic data
Monday:
- Big spike higher in the yen against the majors right off of the week start, most likely reacting to the news of China halting US agricultural imports in retaliation for Trump’s tariff increase, a signal that the damaging trade war between the two countries may get worse.
Tuesday:
- Japan real wages drop for a sixth straight month in June
- Japan’s household spending firm but wages weaker
- Key gauge of Japan’s economy falls to lowest since early 2010
- Uniform roller coaster moves for yen pairs during the Asia session, likely on global risk sentiment moves sparked first by a reaction to the U.S. officially labeling China as a currency manipulator. The turn around later came when the PBOC made moves to limit the weakness in the yuan, bringing some relief to the markets and thus lowering the demand for safe havens like the Japanese yen.
Wednesday:
- Bank of Japan flagged need to discuss ideas on easing, meeting summary shows
- Japanese bank lobby head warns BOJ against deepening negative rates
- Somewhat of a broad move higher against the majors as traders ignore the bearish rhetoric from the BOJ to bid up the yen on growing risk aversion sentiment. The likely spark was the very dovish RBNZ meeting that surprised the markets with a 50 basis point cut versus an expected 25 basis point cut.
Thursday:
- Japan’s current account surplus down in 1st half on weak exports
- Slight decline in the yen against the major currencies as risk sentiment turned more positive during the U.S. trading session. It’s likely China’s rhetoric to stabilize the yuan and the positive Chinese trade data was what had traders in a better risk mood and offloading some safe haven plays.
Friday:
- Japan M2 money supply increases by 2.4%
- Japan’s GDP thumps forecasts on robust consumer, business sectors
- Risk aversion sentiment rises on the Friday session, likely on the news that the US government won’t do business with Huawei and is not ready to make a trade deal with China. As usual, the Japanese yen rises against the majors during times of uncertainty and stress, and ending the week on a strong foot.
