Japanese Yen remains undervalued, BIS REER at lowest since Feb 2016

The Bank for International Settlement (BIS) published Real Effective Exchange Rate (REER) data last Friday for the month of January.

The Japanese Yen remained undervalued (below 100.00) in January. The REER stood at 76.06; the lowest since February 2016. A reading below 100.00 is a sign that the currency is undervalued and the reading above 100.00 indicates overvaluation.

The ‘undervalued’ status of the Japanese Yen contradicts the fact that Japan logged its second-biggest current account surplus on record in 2016.

The data released today showed a rise in the Japanese trade deficit to JPY 1,086.9 billion in January. However, the data should be taken with a pinch of salt as January is usually a weak month for exports on account of the Lunar New Year. Meanwhile, the rally in oil prices boosted the import bill.

USD/JPY Technical Levels

The Dollar-Yen pair clocked a low of 112.79 earlier today and was last seen trading around 113.13. A break above 113.21 (10-DMA) would expose 113.52 (5-DMA) and 114.00 (zero figure). On the other hand, a breakdown of support at 112.79 (session low) could see the spot revisit the sliding trendline support seen around 112.50. A daily close below the same would expose 112.05 (Feb 2 low).