Forex Flash: Yen correcting in line with Fundamentals – BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that the Yen has strengthened further overnight, extending its corrective rebound following comments yesterday from the Japanese Economic Minister Amari, which has prompted investors to reassess the scale of Yen weakness desired by the government.
In a Nikkei article overnight LDP Secretary General Ishiba also highlighted that a weaker yen may trouble some industries which has helped reinforce the yen's recent upward momentum. He maintains that the price action is more a reflection of crowded short yen positioning which had made a yen correction higher after largely interrupted heavy selling since July 2012 long overdue. He adds, "It is also a reflection that yen over valuation is closer to being almost fully unwound according to our long term models with further downside potential likely to require a fresh catalyst."
The comments from Economy Minister Amari and Secretary General Ishiba do not appear particularly important providing limited extra info on the government's current yen weakening policy. There appears to have been some degree of confusion over exactly what Economy Minister Amari stated yesterday with Reuters reporting that he stated that the "yen has corrected to a level in line with fundamentals", whereas the more accurate translation according to Hardman's colleagues in Tokyo was reported on Bloomberg as the yen is "currently" correcting to a level in line with fundamentals."
As Japanese authorities are still considering further monetary easing to help weaken the Yen. Hardman finishes by writing, "As evident by comments from BoJ board member Shirai overnight who commented on the benefits and costs of lowering rates on banks' excess reserves held at the BoJ. The release of the stronger than expected machinery orders report for November overnight provided some tentative signs that Japanese economy is beginning to improve with core private machinery orders expanding for the second consecutive month by 3.9%M/M."
In a Nikkei article overnight LDP Secretary General Ishiba also highlighted that a weaker yen may trouble some industries which has helped reinforce the yen's recent upward momentum. He maintains that the price action is more a reflection of crowded short yen positioning which had made a yen correction higher after largely interrupted heavy selling since July 2012 long overdue. He adds, "It is also a reflection that yen over valuation is closer to being almost fully unwound according to our long term models with further downside potential likely to require a fresh catalyst."
The comments from Economy Minister Amari and Secretary General Ishiba do not appear particularly important providing limited extra info on the government's current yen weakening policy. There appears to have been some degree of confusion over exactly what Economy Minister Amari stated yesterday with Reuters reporting that he stated that the "yen has corrected to a level in line with fundamentals", whereas the more accurate translation according to Hardman's colleagues in Tokyo was reported on Bloomberg as the yen is "currently" correcting to a level in line with fundamentals."
As Japanese authorities are still considering further monetary easing to help weaken the Yen. Hardman finishes by writing, "As evident by comments from BoJ board member Shirai overnight who commented on the benefits and costs of lowering rates on banks' excess reserves held at the BoJ. The release of the stronger than expected machinery orders report for November overnight provided some tentative signs that Japanese economy is beginning to improve with core private machinery orders expanding for the second consecutive month by 3.9%M/M."
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