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21 May 2013
Flash: JPY continues to take centre stage - DBS Group
FXstreet.com (Barcelona) - DBS Group analysts note that the Japanese yen continues to take centre stage in currency markets.
They see that the debate has started over whether the yen has corrected its excessive strength, and whether excessive weakness going forward may be counterproductive to efforts to reinvigorate Japan’s economy. Further, Economy Minister Akira Amari has declined to affirm if the yen has, or has not, corrected its strength. Instead, they note that he is leaving it to markets to find a level in line with fundamentals. Alternatively, Finance Minister Taro Aso, meanwhile, appeared more preoccupied with the volatility in Japanese Government Bond (JGB) market. They note, “What is clear is that there will be less official rhetoric to encourage further yen weakness.”
They team continue to add that according to a Reuters Corporate Survey yesterday, almost half of Japanese corporates surveyed wanted the Japanese yen to stabilize at 100 to the USD dollar. Interestingly, they note that for every one respondent that did not mind a yen weaker beyond 105,there were almost two who wanted the exchange rate to be stronger at 95. They finish by commenting, “Interestingly, the 95-100 range is also the range that Japan’s officials have highlighted previously that they were comfortable with. This is not what speculators want to hear, especially now that they have accumulated large yen short positions not seen since 2007.”
They see that the debate has started over whether the yen has corrected its excessive strength, and whether excessive weakness going forward may be counterproductive to efforts to reinvigorate Japan’s economy. Further, Economy Minister Akira Amari has declined to affirm if the yen has, or has not, corrected its strength. Instead, they note that he is leaving it to markets to find a level in line with fundamentals. Alternatively, Finance Minister Taro Aso, meanwhile, appeared more preoccupied with the volatility in Japanese Government Bond (JGB) market. They note, “What is clear is that there will be less official rhetoric to encourage further yen weakness.”
They team continue to add that according to a Reuters Corporate Survey yesterday, almost half of Japanese corporates surveyed wanted the Japanese yen to stabilize at 100 to the USD dollar. Interestingly, they note that for every one respondent that did not mind a yen weaker beyond 105,there were almost two who wanted the exchange rate to be stronger at 95. They finish by commenting, “Interestingly, the 95-100 range is also the range that Japan’s officials have highlighted previously that they were comfortable with. This is not what speculators want to hear, especially now that they have accumulated large yen short positions not seen since 2007.”