Week in FX Asia – Forget Flows Yen Bear Eyes ¥100

Last weeks portfolio flow reports out of Japan (Oct. 4th) saw one of the largest inflows on record. Japanese residents repatriated +¥2.22-trillion – driven primarily by the sale of foreign bonds. While the large one-off selling may be considered somewhat extraordinary, analysts note that looking at the four-week average, there is little evidence to suggest anything unusual. Investor flows remain consistent with rebalancing of assets following recent USD/JPY moves.

However, the USD/JPY gain over the last few days probably tells a more compelling story. It strongly suggests that the FX market does not believe the US will fall over its fiscal cliff. There seems to be enough belief being currently priced in by investors to indicate that rivaling US lawmakers will not be reckless and irresponsible when its finally comes to “crunch time.” Under the present circumstances it would probably require a US default or “selective default” as defined by various rating agencies to trigger considerable Yen gains for safe-haven reasons.

The current stalemate scenario in the US would need to push the US economy towards a renewed recession before markets get to witness the Yen bull claiming the upper hand. The short-term techies expect the USD/JPY to maintain its upward momentum and continue to climb slowly towards the psychological ¥100 – being supported by the recent spate of disappointing Japanese macro data.

WEEK AHEAD

* CNY Consumer Price Index
* GBP Consumer Price Index
* EUR German ZEW Survey
* NZD Consumer Prices Index
* GBP Jobless Claims Change
* EUR Euro-Zone Consumer Price Index
* GBP Retail Sales
* CNY GDP YTD
* CAD Consumer Price Index

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell