The dollar / yen ended almost flat on Friday as increased demand for riskier US stocks helped dampen the appeal of the Japanese yen as a safe haven, creating offsetting trade. A slight rise in US Treasury yields also helped support the greenback. No major economic report from the United States has helped reduce volume and volatility.
USD / JPY stood at 109.791 on Friday, up 0.010 or + 0.01%.
When there is not much concern in the market, Dollar / Yen investors revert to carry-trade, that is, they buy risky assets and sell the Japanese Yen after borrowing from Japanese banks at extremely low interest rates. This is likely what we saw on Friday following a volatile trading throughout the week linked to the Federal Reserve minutes release on Wednesday and concerns about the COVID outbreak.
USD / JPY may have been supported on Friday as Wall Street rallied and Fed nervousness subsided. Major U.S. stock indexes closed sharply higher, ending a tumultuous week of easing concerns about whether the U.S. Federal Reserve could start tightening its accommodative monetary policy sooner than expected.
Friday’s dollar / yen rate also reflected the mixed performance of the US Treasury markets. Yields moved sideways amid continued uncertainty over the delta variant spread and discussions about reducing the Fed’s bond purchases.
The benchmark 10-year Treasury bill yield increased 1 basis point to 1.257%. The yield on 30-year Treasury bills fell by less than a basis point to 1.868%.
Although Treasury yields have surprisingly fallen all week, the USD / JPY has remained firm as the latest Federal Reserve meeting minutes, released on Wednesday, showed central bankers plan to cut purchases of bonds before the end of the year.
Additionally, concerns about the spread of the delta variant continued to weigh on sentiment.
In economic news, Japan’s consumer staples have slipped their annual rate of decline for three consecutive months in July, a sign that global commodity inflation was offsetting some of the deflationary pressure from a collapse in prices. expenditure induced by the pandemic.
But analysts expect consumer inflation to remain well below levels seen in the United States and Europe, as Japan’s decision on Tuesday to extend the state of emergency until mid- September deals a blow to already weak household spending.
Short term outlook
We expect more of the same choppy, bilateral negotiation in the near term, as many major players sit on the sidelines ahead of the central bankers summit in Jackson Hole, Wyoming, August 26-28. Market participants will await information on the Fed’s “tapering talks” as many central bankers aim to move away from the ease policy.
For an overview of all of today’s economic events, check out our economic calendar.
This article originally appeared on FX Empire