The Japanese Yen (JPY) extends losses against the US Dollar (USD) in a calm trading session on Monday.
The USD/JPY has returned above 159.00 after bouncing from lows near 158.00 last week and approaches the key 160.00 level, which highlights that the mere threat of intervention is not enough to support a significant Yen recovery
Economic growth seen as key to unlocking a sustainable yen rally Strategists at Societe Generale argue that the key to a more durable recovery in the Yen lies less in rate differentials and more in the domestic growth story. “I suspect that what is really needed to kick-start a sustainable yen rally, however, is an upgrade to Japanese forecasts, more than anything to do with differentials.” While acknowledging that the “current consensus looks for average growth this year and next of 0.75%, which is better than it was a few months ago,” they caution that this remains “still significantly lower than before the Gulf conflict pushed up oil prices,” underscoring the need for a more convincing improvement in Japan’s growth outlook before expecting a sustained JPY rebound. Japan flow dynamics erode support for the Yen FX Analysts at BNY Mellon put the focus on the growing concerns about Japan’s fiscal balance, underscoring that Japan’s latest portfolio flow data show foreign investors stepping up sales of Japanese Government Bonds. “Foreign investors accelerated JGB selling last week, with net outflows of ¥1.25tn, cutting YTD foreign net purchases to ¥4.99tn, the lowest cumulative level since early February,” state the analysts. The BNY Mellon experts add that, “overall, the flow mix points in the same direction for the currency: foreign selling of Japanese bonds and stronger Japanese buying of foreign assets weaken support for JPY and leave it vulnerable to further depreciation.” USD/JPY downside momentum fades as range-bound trade persists In the same line, Strategists at UOB Group retain a mildly negative bias on USD/JPY but discard a…