Yahoo Finance USD/JPY Fundamental Daily Forecast – Not Likely to Turn Higher Until Stocks Find Support
The Dollar/Yen plunged on Monday, dragged down as U.S. Treasury yields fell from four-year highs on Monday after the steep sell-off in equity markets sparked demand for lower-yielding debt.
The USD/JPY settled at 109.133, down 1.004 or -0.91%.
The liquidation in the stock market also drove the Japanese Yen higher because of the carry trade. Investors aggressively sold stocks priced in U.S. Dollars then paid back bank loans priced in Japanese Yen. This action drove down the dollar and fueled a rally in the Yen.
The sell-off in the U.S. stock markets on Monday was a continuation of Friday’s weakness as investors rushed to the exits in the wake of rising interest rates.
In other news, Bank of Japan Governor Haruhiko Kuroda said on Monday the central bank must maintain its ultra-loose monetary policy as inflation remained distant from its 2 percent target.
“Still, it’s extremely important to achieve our 2 percent inflation target,” Kuroda said. “Japan’s inflation remains distant from our target, so we need to patiently continue with powerful monetary easing.”
Forecast
The stock market is under tremendous pressure again early Tuesday. This is driving the Dollar/Yen sharply lower because of the aforementioned reasons.
At 0457 GMT, the USD/JPY is trading 108.630, down 0.503 or -0.47%. The downside momentum suggests sellers may go after the recent bottom at 108.277. This could trigger a plunge into the next main bottom at 107.312.
The trend will change to up on a move through 110.477.
U.S. government bond prices are rising in the overnight market on safe-haven demand. The yield on the benchmark 10-year U.S. Treasury note last stood at 2.7093 percent after rising as high as 2.88 percent on Monday.
Just a short while ago, Kuroda said the fundamentals behind stock prices remained solid as the Japanese, U.S. and European economies were in “very good shape.”
“The recovery (in these economies) is broadening across sectors and the outlook remains good as a trend,” Kuroda told parliament, adding that the central bank was carefully watching financial market developments.
This article was originally posted on FX Empire
