On Monday, the second Japanese Prime Minister in a row quit after less than a year in office. PM Yasuo Fukuda unexpectedly announced his resignation, as he said that efforts to overhaul the economy were unable to overcome a split parliament.
The news came after the Asian markets closed, so volatility in Japanese equities but especially Japanese bonds could pick up during the opening of tonight’s Asian trading session. Nevertheless, we know that risk sentiment remains the primary driver of the Japanese yen. How? Political turmoil has recently emerged and Japanese economic data has been absolutely abysmal, yet the low-yielding currency has remained strong against its foreign counterparts. With global credit risks remaining high and equity markets susceptible to sharp decline, traders aren’t rushing to pile into the carry trade quite yet. [B]My bias for the Japanese yen going forward: bullish.[/B]
[B]Check out [/B][B]Daily Fundamentals[/B][B] in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.[/B]