USD/JPY Fundamental Forecast – September 9, 2016

The USD/JPY has returned to just where it sat for the US dollar mini rally earlier this month. The yen is trading at 101.69 down 6 points matching the decline in the US dollar.

The Japanese government reported the adjusted current account with a surplus of ¥1.45 trillion, below the ¥1.59 trillion surplus seen and an un-adjusted current account surplus of ¥1.938 trillion, also below an expected ¥2.09 trillion surplus. Also in Japan, bank lending for August rose 2.0% year-on-year as expected. Japan’s gross domestic product was bumped up to 0.2 percent on a seasonally adjusted quarterly basis in the second quarter of 2016, the Cabinet Office said in Thursday’s final reading. That beat forecasts for a flat reading, which would have been unchanged from the August 15 preliminary reading.

The Ministry of Finance said that Japan had a current account surplus of 1938.2 billion yen in July. That was shy of forecasts for a surplus of 2073.3 billion yen, but up from 974.4 billion yen in June.

The trade balance reflected a surplus of 613.9 billion yen, beating forecasts for 579.4 billion yen, although down from 763.6 billion yen in the previous month.

The Bank of Japan is split on whether to add stimulus at its Sept. 20-21 policy meeting, where central bank Governor Haruhiko Kuroda has said the board will conduct a comprehensive assessment of the effects of its stimulus program.

“The yen is strengthening on the back of this story and unwinding some expectations that the BOJ would ease policy at their September meeting,” said Ian Gordon, FX strategist at Bank of America Merrill Lynch.

The euro and yen have strengthened this year as traders speculated that stimulus efforts in Europe and Japan were reaching their limits. That diminished monetary policy divergence with the U.S. Federal Reserve, which held off on raising interest rates and caused the dollar’s rally to fizzle against its biggest peers.

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Upcoming Economic Events that you should be monitoring:

 September 9, 2016

Government Bond Auctions

Date Time Country Auction

Sep 08 11:00 Ireland Holds bond auction

Sep 08 17:20 Italy Announces details of bond auction