Japanese Yen, USD/JPY, US Greenback, BoJ, YCC, CHF/JPY, Crude Oil, WTI – Speaking Factors

• USD/JPY continues to tread water after inflation knowledge
• Mr Yen sees USD/JPY at 120 on the again of additional BoJ tightening
• CHF/JPY and oil markets could be telling us one thing about USD/JPY

The Japanese Yen is little flummoxed after right now’s CPI numbers unveiled constructing value pressures for the archipelago nation.

Headline CPI was the best it’s been for 30-years at 3.8% year-on-year to the tip of November. This was beneath the three.9% anticipated however above the earlier learn of three.7%.

Core inflation got here in at 3.7% year-on-year to the tip of November which was according to expectations and above the three.6% prior.

Former Vice Finance Minister Eisuke Sakakibara was interviewed on Bloomberg tv and stated that he might see USD/JPY going to 120. He is called Mr Yen because of the excessive regard of his stewardship by the Asian disaster of the late 1990’s.

Earlier this 12 months he stated that USD/JPY might go to 150. It traded simply shy of 152 in October, the best stage since 1990. He thinks that the BoJ might increase the cap on their yield curve management at their January assembly.

To recap, on Tuesday this week, the BoJ modified its yield curve management (YCC) program by concentrating on a band of +/- 0.50% round zero for Japanese Authorities Bonds (JGBs) out to 10 years.

They beforehand focused +/- 0.25% round zero and USD/JPY collapsed from 137.50 towards 130.50 on the lean.

Additional tightening of financial coverage by the BoJ will not be what some market members are anticipating, and an additional hawkish stance would possibly come as a shock. This might see Yen recognize additional, doubtlessly validating Mr Yen’s prediction.

A stronger Yen might contribute in a optimistic approach to the Japanese financial system. Imported inflation from a weaker Yen will be undesirable because it dampens already fragile demand. A rising Yen has the potential to unwind this influence.

Moreover, Japan depends closely on importing vitality and because the Yen climbs, this can alleviate family stability sheets to spend elsewhere within the financial system. Taking a look at WTI crude oil priced in Yen as a proxy for this dynamic, the aid turns into obvious.

Elsewhere, CHF/JPY additionally seems to have doubtlessly rolled over after scaling to a 7-year peak in September. The Swiss Franc has some related traits to the Yen and if this cross price continues to slip decrease, it might be saying one thing about the place traders are looking for a funding foreign money.

OIL/JPY AND CHF/JPY

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the feedback part beneath or @DanMcCathyFX on Twitter