The Bank of America Merrill Lynch pay attention to the stability of the dollar/yen in the face of the growing trade war and believe that this phenomenon can be sustainable.
U.S. President Donald Trump intends to introduce tariffs on Chinese goods totaling $34 billion on Friday morning, but this does not prevent growth in the stock market, which helps to maintain pressure on the offer around 110.70 in the USDJPY. currency strategists of Bank of America Merrill Lynch state that unlike the yen crosses, this currency pair proved to be extremely resistant to the decline of risk appetite against the background of the threat of a large-scale trade war, and consider such behavior quite justified.
The currencies of developing countries, in the context of the darker prospects of world trade, have proved to be a weak link, but the yen, coupled with the dollar, has not been able to play the role of a safe haven currency. Investors do not yet believe that the US and China after a series of exchange of blows will not be able to agree, while in trade disputes more vulnerable in their eyes see us opponents. As a result, one of the main topics in the news space is the tightening of the fed’s policy, and BofAML believes that until market participants revise the risk assessment of weaker growth of the US economy, and hence the fed’s rates, the divergence between the USDJPY and the Nikkei225 index can remain. The Bank notes that one of its reasons was the combination of reduced exposure of foreign investors in Japanese securities and a record outflow of capital associated with m&a (mergers and acquisitions) involving Japanese companies. BofAML reminds that the latter is a structural trend that reflects the aging of the Japanese population.