The Japanese yen was extremely weak last week. The market sentiment was favorable to the currency initially, but it sharply turned negative for the yen after the European Central Bank refrained from additional stimulus and was relatively optimistic about the future of the European economy. The better-than expected US non-farm payrolls did not help the Japanese currency either. But what about this week?
Domestically, things do not look good for the yen. The Bank of Japan meets on Tuesday, March 11, and there is a chance that the central bank will make monetary policy more accommodative. Admittedly, the chances do not look particularly high, but they increased after the economic growth estimate received a downward revision. Additionally, the minutes of the previous policy meeting will be released on Friday, March14. They may give insights into the thinking of Japanese policy makers, but the impact of this release will likely be limited as they will be released after the most recent meeting.
Overseas, news was a bit more favorable, increasing demand for safe currencies. While fears about the situation in Ukraine receded, the problems there were not resolved and may yet push the Forex market into the risk-off mode in case of a major conflict between Russia and Ukraine (or the United States perhaps). Poor Chinaâs economic data also made investors less willing to risk, but, surprisingly enough, its impact on the currency market was rather limited.
All in all, fundamentals are a bit mixed for the yen, but it looks like the adverse ones have more influence on the currency. As a result, the outlook for the yen is neutral with a downward bias. DailyFX is neutral on the currency, while Forex Crunch believes that the yen should lose to the dollar.
It is worth noting that there will be important events that may affect the performance of the yen against the Australian and New Zealand currencies. It is expected that the Reserve Bank of New Zealand will perform an interest rate hike, while analysts anticipate robust employment data from Australia. Both these event may lead to losses of the Japanese currency against the Aussie and the kiwi.
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