helllo,
The head of the Bank of Japan said in the WSJ that investors should not expect further strengthening of the yen. This has been interpreted as a verbal intervention and the suggestion that the BoJ is ready for the real intervention, although it seems that such a step is far. Kuroda says that the yen should not strengthen even if inflation reaches the target.
USD/JPY currency pair at the moment reached the key trend line after the previous defense support in the level of 100.80. It seems that it is the struggle with the current line can determine the further fate of the currency pair. Confidence in small business in Japan, Index increases from 45.4 to 46.6 points.
The below chart present the spread between 10Y U.S. Govt Bond and Japanese Govt Bonds and USD/JPY currency pair.
At present, the spread between bonds indicates that we should be around 101.50.
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| chart 1. spread between 10Y US Govt Bond & Japan Govt Bond |
In addition, following opinion of MG
Morgan Stanley holds a tactical short position on USD/JPY. According to the bank, the BoJ does not yet introduce additional bond purchases under the monetary policy so that the yen may continue to strengthen. MS is still keeping at the level of 98.
MS recommends short positions after growth corrections.
regards,
oscarjp
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