Last week’s USD/JPY

Last week ‘s USD/JPY went below 111.00 in the middle of the week and the dollar went down to 110.85, but it cut back immediately on the next day and repulsed to the late 111.00 level, and last weekend recovered up to a rate of 112 which was marked on March this year. Although the upper price seems to be heavy on the Tokyo market after the week, it has been hovering around 112, which is unexpectedly strong. 

US economic news, including TAG between U.S and Japan from today

The US economy is mixed with its strength and weakness, plus the Fed’s monetary policy is neutral, which makes it not become a definitive move due to the lack of material to move the market. However, the move to put the yen on the 112 level again can not just be explained by the interest rate differential between Japan and the United States, and the market may have become accustomed to President Trump’s stance on China and the EU. And that may also be the case for the Japan-US Trade Agreement on Goods (TAG) talks, which starts today. Prior to the talks, US Secretary of Treasury, Mnuchin has already declared that exchange rate issues will also be on the agenda, and has told that the talks will face a tough stance. It is thought that if the exchange rate clause is included in the agreement document, the dollar will weaken and the yen will rise, but the market seems to be optimistic. 

Continuously positive Chinese economy

One of the reasons for the dollar-yen pair to be in the 112 yen range at the end of last week in NY was an economic news that showed China’s economic recovery. According to the trade balance in March, with exports growing at 14.2% YoY and intensifying trade friction, there was a rapid increase in voices pointing to the bottoming of China ‘s economy as exports grew. Also in this morning ‘s report, China’ s prime minister Li Keqiang showed confidence in achieving their goal of economic growth of 6.0 – 6.5 % as there was a “pretty positive change” in the manufacturing industry since March in the business forum held in Croatia last week. China’s January-March GDP, which is to be announced on the 17th this week, is expected to be 6.3%, but there are growing voices pointing out the possibility of becoming upside. Given that the impact on the world economy is also large, this GDP seems to be attracting and paid considerable attention. 

TAG is the biggest economic event for this week

The economic news that will be the most watched this week will be the direction of the Japan-US Trade Agreement on Goods (TAG) talks mentioned above. Mr. Mogi, a representative of Japan’s economic regeneration minister had previously stated that “I do not think that the exchange rate problem will be on the agenda,” but as stated above, the US side has the intention to bring it up. Along with the “exchange clause”, the “automotive issue” is also an important topic. Toyota has already announced further investment in the United States to ensure automotive issues not to be on the table, but it is unclear whether Trump will give Japan an easy consideration.

USD/JPY chart shows a sign of the strong US dollar, however, it is also the first time in five weeks that it has been around 112, so it will be easier to place orders for selling dollars, especially among export sources. It is worth watching how they can update their “year-to-date high” and how far they can extend the high.