Japanese investors unlikely to take FX risk aehad of Golden Week holidays - MUFG

Author: Adam Button | Category: News

Yen-trading strategy

Yen-trading strategy

MUFG Research discusses USD/JPY outlook and adopts a neutral bias , expecting the pair to trade in a 1110-113 range in the near-term.

"USD/JPY has remained flat since the last week of March after rising. But the real effective USD/JPY exchange rate reflects a weakening JPY. The lower bound for USD/JPY is firm. Japanese investors net-bought JPY1.2 trillion of overseas securities the last week of March, mostly medium- and long-term bonds. Japanese investors built up their overseas bond positions at the end of the fiscal year," MUFG notes. 

"JPY rates have started to rise slightly in FY19. Japanese investors have been realizing their valuation gains as JPY yields fell in Q1 2019. They seem to be buying overseas bonds after taking the gains. But Japanese investors are unlikely to actively take currency risk ahead of the 10-day Golden Week holidays. The ECB meets next week and is unlikely to change its decision and to shake USD/JPY just after the adjustment last month. USD/JPY will likely lack firm direction," MUFG adds.

This year Golden Week holidays start on April 29 and run through Monday, May 6.

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