According to Sean Callow, Research Analyst at Westpac, the worst fears over North Korea have not been realized, helping ease JPY safe haven demand, albeit only after USD/JPY printed 5 month lows just above 108.
“USD/JPY should also find some near term support from more balanced positioning, with leveraged funds slightly net short the pair (at 11 Apr) for the first time since Nov 2016.”
“Still, it is hard to see USD/JPY finding much support from US yields in a week which is likely to conclude with a lousy US Q1 GDP reading (28 Apr).”
“The market focus will be the BoJ meeting. We remain of the view that the current ¥80tn yen JGB holdings target and JGB yields around 0% are inconsistent and confusing. We hope the BoJ uses next week’s meeting as an opportunity to remove this confusion, a factor that should help to stabilise the ¥. We remain neutral until then.”