Japanese Yen: Still Ruled By Risk Aversion Trends

With investors feeling more comfortable in riskier assets, currencies like the Japanese yen are very likely to suffer as economic data plays almost no role in directionality. Furthermore, the sole factor that could fuel sustained gains would be if the Bank of Japan were to become staunchly hawkish. True, they have made no secret their desire to continue on with rate normalization, but with prices remaining in deflation and consumption still very weak, higher interest rates would only be detrimental to the health of the Japanese economy. As a result, pairs like EURJPY and USDJPY are likely to remain closely correlated to global equity flows.