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Forex pairs in this Article » USD/JPY (Barcelona) - Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that the dollar is broadly stable versus the yen, euro and pound but is performing well versus many other currencies – in particular versus the rest of Asia.

Key Quotes

“As good as the dollar is doing in Asia, the yen is out-performing (modestly) with a real danger that a lack of direction in terms of policy in Japan during the quiet August period might result in a further liquidation of the ‘Abe-trade’ – meaning Japanese stocks decline and the yen strengthens.”

“The Topix Index fell 1.5% today and is 7.3% lower from a week ago. The current debate over the implementation of the sales tax certainly isn’t helping instill confidence in Abenomics.”

“We still expect the sales tax to be implemented as scheduled but the debate over this based on near-term economic conditions would suggest difficult decisions on reform may prove slow going.”

“We still expect dollar demand to re-emerge not far below current levels in USD/JPY – but worsening liquidity conditions as we enter August means risks are higher that the move could extend lower than we anticipate.”
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