Headline Mishap Boosts Yen
USDJPY dropped 90 pips overnight after a headline citing Japan’s Economy Minister Amari claimed that the yen “has corrected” back to levels consistent with fundamentals (the grammatical tense used implied the yen has already weakened enough). USDJPY partially recovered after the newswire service issued a correction. In reality, the minister said the yen “is currently automatically correcting to a level in line with…fundamentals”. Amari also echoed remarks made previously, warning against “excessive” yen weakness given “this would cause a spike in import prices”. He hinted at what would constitute excessive noting “it would weigh on people’s livelihoods if the U.S. currency rises above the triple-digit level against the yen”. USDJPY is still trading a long way from such levels, and so we see the overnight price action as a storm in a teacup. It does provide a reminder though of how vulnerable USDJPY is once blind faith in the government’s desire to weaken the yen is called into question. We still expect USDJPY to remain fairly well supported as the countdown to the Jan 22nd BoJ policy decision continues (Prime Minister Abe has already pointed to 90.00 as a satisfactory level).
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank