Profit Taking Hits the Yen Crosses

The Japanese Yen is stronger across the board today after comments from Bank of Japan member Nishimura. He hinted at the possibility of a rate hike by saying that “keeping rates low for a long time is not prudent.”

We think that the market may have overreacted or the selling may be primarily due to profit taking because recent economic data indicates that the economy may not be ready for a rate hike. Besides that, there seems to be no real basis for the yen rally today. There is no major Japanese economic data for the remainder of the week, which means that the moves in the Yen crosses will primarily be dependent upon the demand for carry trades.