In a note out this morning, BK Asset Management managing director Kathy Lien follows the yen’s uphill climb, starting with comments from Bank of Japan Gov. Haruhiko Kuroda after the central bank kept its policy unchanged in the first of two April meetings.
“Investors were surprised by Kuroda’s nonchalant attitude about the potential for future easing. In addition to saying that easing is not required at this time, Kuroda also noted that the downside risks to the economy had diminished and that the labor market is tight and wages should rise following negotiations,” Lien writes.
Then came comments during the U.S. day from Minneapolis Federal Reserve Narayana Kocherlakota which Lien pegs as dovish.
“The losses accelerated when FOMC voter Kocherlakota said the Federal Reserve is underperforming on both inflation and employment, which suggests he favors a slow, unwind of quantitative easing,” she writes.
Other factors adding to the yen advance: Stop-losses at the ¥102 and ¥101.80 levels (the dollar was in the ¥101.70s overnight), further unrest in Ukraine, and a drop in 10-year bond yields.
In any case, Japan exporters — and really any firms with large global exposure — will likely take a hit from the forex moves. At this point, Singapore-traded lead futures for the Nikkei Average show a 1.2% loss at the open. This, on top of the Nikkei’s 1.4% drop yesterday.