7 Feb 2014
Flash: Yen strongly correlated to EM tension still - BTMU
FXStreet (Barcelona) - FX Strategists at the Bank of Tokyo Mitsubishi UFJ notes that under the tensions emanating from emerging markets, the correlation between equity markets and the yen is still very strong.
Key Quotes
"So a worse-than-expected NFP that hits equity sentiment would in all likelihood lead to yen buying."
"In such a scenario USD/JPY may test the 100-level. But we would then expect that Japanese importers would buy USD/JPY and there is technical support with the 200-day MAV also around the 100-level."
"So this level should offer strong support for USD/JPY. On the other hand if the employment data confirms improvement in the US economy, then risk appetite should support emerging markets."
"Perhaps one caveat is that a very strong report might lead to a surge in US long-term yields that may unsettle emerging markets as well. But we wouldn’t expect USD/JPY to fall much. Also we need to watch closely when Chairwoman Yellen gives her first semi-annual testimony to Congress on 11th and 13th but the speech is more likely to settle sentiment rather than disrupt it.”
Key Quotes
"So a worse-than-expected NFP that hits equity sentiment would in all likelihood lead to yen buying."
"In such a scenario USD/JPY may test the 100-level. But we would then expect that Japanese importers would buy USD/JPY and there is technical support with the 200-day MAV also around the 100-level."
"So this level should offer strong support for USD/JPY. On the other hand if the employment data confirms improvement in the US economy, then risk appetite should support emerging markets."
"Perhaps one caveat is that a very strong report might lead to a surge in US long-term yields that may unsettle emerging markets as well. But we wouldn’t expect USD/JPY to fall much. Also we need to watch closely when Chairwoman Yellen gives her first semi-annual testimony to Congress on 11th and 13th but the speech is more likely to settle sentiment rather than disrupt it.”