JPY gives away gains post-Abe/Trump meeting – BTMU

Currency Analyst at BTMU Lee Hardman evaluated the recent meeting between President Trump and PM Abe and the prospects for the Japanese currency.

Key Quotes

“The yen has weakened modestly during the Asian trading session resulting in USD/JPY briefly rising back above the 114.00-level. Yen selling has been encouraged by the favourable meetings between President Trump and Prime Minister Abe which were held over the weekend. The meetings confirmed both leaders’ “strong determination” to further reinforce the alliance and economic ties between Japan and the US. President Trump stated that he had “very, very good chemistry” with Prime Minister Abe. In the joint statement both leaders “reaffirmed their commitments to using the three-pronged approach of mutually-reinforcing fiscal, monetary, and structural policies to strengthen domestic and global economic demand”. In order to deepen their trade and investment relations, the two leaders will hold discussions on a bilateral framework following President Trump’s recent decision to withdraw from the Trans-Pacific Partnership”.

“The BoJ is confident that Japan’s economy will continue to expand solidly in 2017. Yet the still weak inflation outlook continues to leave scope for the BoJ to maintain its current loose policy stance in the near-term which is still weighing heavily on the yen. According to our long-term valuation models, the yen remains significantly undervalued against the US dollar despite modest gains early this year”.