JPY vulnerable to knee-jerk haven-driven gains - Scotiabank

Analysts at Scotiabank explained the JPY is down a modest 0.2% from Friday’s close, retreating from fresh multi-week highs reached in early Asian trading. 

Key Quotes:

"The broader tone appears tentative, leaving JPY vulnerable to knee-jerk haven-driven gains and compounding the support from narrowing interest rate differentials."

"The 10Y U.S.-Japan yield spread has recently tested fresh 2017 lows around 210 bpts and the 2Y spread is softening toward the lower end of its 2017 range. 

Near-term domestic risk lies with the release of labor cash earnings data (8pm ET) and Thursday’s final Q1 GDP."

"Risk reversals are steady pricing a premium for protection against JPY strength with limited movement since mid-May."