The Japanese Yen (JPY) is consolidating above its late November lows, with yield spreads modestly tilted against it. With the Bank of Japan tightening its forecasts and major Fed and Tankan events approaching, near-term volatility risks remain high, Scotiabank chief FX strategists Sean Osborne and Eric Theort said.
The wider yield spread between the US and Japan is the driver behind the recent move
“The yen is stable, consolidating its recent decline while still trading above the lowest local level since mid-to-late November. The recent decline was mainly driven, with US and Japanese bond yield spreads widening modestly from their recent lows.”
“The outlook for relative central bank policy remains supportive as we head into the Bank of Japan’s policy meeting next week, with markets anticipating a 23 basis point tightening. Near-term risks lie with the Fed, with quarterly Tankan domestic sentiment numbers scheduled for release early next week.”
