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Forex Flash: Weak NFP impact upon USD/JPY proves fleeting - BTMU

FXstreet.com (Barcelona) - Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that the yen has continued to weaken in the Asian trading session with USD/JPY rising to an intraday high at 98.85 and moving ever closer to the psychologically important 100 level which last held on a sustainable basis prior to Lehman´s collapse in September 2008 when the Fed´s funds rate was still held above 2.00%.

He sees that USD/JPY’s attempt to reestablish itself back above the 100-level despite the Fed funds rate having being lowered and still being held at close to 0% highlights the powerful negative impact the new aggressive monetary easing programme from the BoJ is having upon investor expectations over its ability to successfully reflate the Japanese economy. Indeed, he adds that even further evidence that the US economy is losing upward momentum heading into Q2 provided by the much weaker than expected NFP report for March has had little negative impact upon USD/JPY.

Hardman notes that the pair initially briefly declined below the 96.00-level following the release of the NFP report on Friday which triggered strong buying activity. The NFP report revealed that the pace of employment growth slowed sharply in March to 88k from an upwardly revised 268k in February. As a result the underlying trend of employment growth during Q1 averaged 168k/month. In the household survey the drop in the unemployment rate was not a reflection of improving labour market conditions as it was driven by the labour force shrinking 496k while employment contracted by 206k.

He continues to state that it remains to be seen whether weakness in March is in part payback for strength in February or the start of a more prolonged slowdown as the impact of fiscal tightening hits the US economy. The Fed is likely to view the slowdown in job growth in March initially as temporary. Should the slowdown become more prolonged ahead it will likely begin to weigh more heavily upon the US dollar. He writes, “The aggressive monetary easing plan adopted by the new BoJ leadership has been welcomed by both the IMF and S&P. The weaker yen so far appears to have had limited impact upon Japan’s exports with Japan posting a marginal seasonally adjusted current account deficit in February. It was driven by a record trade deficit totaling JPY1.14 trillion as exports contracted by 2.7%M/M and imports rose by 5.6%M/M.”

Forex Flash: JPY Position Squaring Ahead of the BOJ - Nomura

Nomura strategists note that the notable spec position changes were selling of EUR and buying of JPY, the latter of which was likely position squaring ahead of the important BOJ meeting later in the week.
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