USD/JPY: Neutral between 107.50 - 111.00 moved by risk aversion - MUFG

Analysts from The Bank of Tokyo-Mitsubishi UFJ, point out that the USD/JPY  pair  is being driven by risk aversion rather than yield spread.

Key Quotes:

“Recent comments by Fed Chair Yellen and FOMC members supported the previous rise in USD/JPY. However USD/JPY topside has been heavy at around 111, despite growing expectations of a summer rate hike. The next rate hike alone may not be enough to support an aggressive US dollar rally.”

“Looking ahead, the non-farm payrolls figure, due Friday, may not support a renewed rise in USD/JPY. Rate hike expectations may weigh on the stock markets and USD/JPY, possibly hurting stock and commodities prices as risk aversion increases. The US labor market has tightened. Though a worse payrolls report could weigh on USD/JPY because a Fed rate hike has been well anticipated.”