Japanese Yen: Further weakness against US Dollar remains a risk – MUFG

FXStreet Insights Team FXStreet

MUFG’s Derek Halpenny argues that rising crude Oil prices, higher global yields and Middle East tensions are undermining Japanese Yen stability and working against recent Ministry of Finance (MoF) intervention. With the Bank of Japan (BoJ) having held rates, Japanese Government Bonds are underperforming and real yields remain too low, leaving further FX intervention as the likely tool to prevent another sharp move higher in USD/JPY.

Higher yields and Oil pressure Yen

"Crude oil prices are moving higher again and that is going to further unsettle sovereign bond markets with inflation concerns more elevated this week following higher than expected inflation in the US."

"As we have written here before, the success or failure of MoF intervention to strengthen the yen was always going to come down to factors outside Japan’s control and those factors are clearly working against a strengthening of the yen."

"Global yields are heading higher once again, and crude oil is drifting higher with the Strait of Hormuz closed."

"USD/JPY is clear through the 158-level that marked the point when the MoF last intervened on 6th May and is quickly retracing back to the highs on 30th April when intervention first took place (both interventions to be confirmed)."

"Real yields are too low to stabilise super-long yields and real yields are declining further as inflation rises which likely makes further FX intervention by the MoF / BoJ necessary."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD surges to multi-day peaks past 1.3250

GBP/USD leaves behind Friday’s small pullback and advances past 1.3250 level, or five-day highs, on Monday. Cable’s upside follows extra losses in the Greenback, while traders continue to assess the geopolitical front and upcoming key events.

EUR/USD pops to daily highs near 1.1430

EUR/USD starts the week on a positive note, climbing to as high as the 1.1430 zone, or daily tops, on Monday. The pair’s recovery comes in response to the broad-based US Dollar weakness, while investors continue to monitor developments from the Middle East ahead of the beginning of the ECB's annual forum.

Gold struggles to attract investors

Gold remains under marked selling pressure, holding on just above the key $4,000 mark per troy ounce at the beginning of the week. The precious metal reverses two daily advances in a row as renewed effervescence in the Middle East revive inflation concerns and bolster Fed rate hike expectations.

Bitcoin four-year cycle: BTC risks 75% drawdown with four months of bear market still ahead

Bitcoin price continues to trend downward below the $60,000 support zone after losing over 50% of its value since the $126,199 high in October. Bitcoin’s four-year cycle, measured from cycle tops to bottoms, suggests that four months of a bear market are still ahead.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.