The JPY has seen decent strength overnight, USD/JPY down t 96.70 compared to a North American close Monday around 97.80, while EUR/JPY is down at 133.50 from around 134.90.
The JPY is benefitting from a marked uptick in risk aversion, with Asia stockmarkets posting heavy losses overnight.
The market certainly didn’t like yesterdays release of New York Fed’s Empire State Index, which fell to minus 9.4 in June from minus 4.6 in May.
But this is more of a general reassessment by the markets, and the conclusion reached seems to be that improved sentiment surrounding global economic recovery has gotten ahead of itself, without maybe the hard evidence being present to back up the surging optimism.
Funnily enough the pick up in risk aversion coincides with the Bank of Japan raising it’s view of the Japanese economy for a second month in a row, as improvements in exports and industrial output add to evidence Japan’s recession is easing.
It’ll be interestimg to see what The German ZEW investor index for June comes in at later today, the median forecast calling for a rise to 35 from 31.1 in May.
