Analysts at Scotiabank noted that JPY is quiet, consolidating just above Friday’s low, a mid-performer among the G10 in an environment of modest USD weakness.
"Interest rate differentials are widening in a bearish manner, as the 2Y U.S.-Japan spread extends through 250bpts to levels last seen in late 2007. The 10Y spread is back above 280bpts but still below its multi-year high from late February. The broader tone remains critical as market participants assess the impact of ongoing geopolitical developments.
PM Abe and President Trump are set to meet on Tuesday, and Japan’s domestic release calendar includes industrial production, trade, and CPI data.
Risk reversals suggest a continued erosion in the premium for protection against JPY strength vs. both the USD and EUR. We are bullish USDJPY, looking to an extension of the recent rally, through 107.80 toward the mid-108s.
EURJPY has cleared its 200 day MA (132.23) and should see continued medium-term gains toward 136."
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