[FXJourney]

It is interesting to note that there are been very few complaints coming from the Japanese exporters regarding yen strength, with the large exporters also reporting improving profitability in some cases. This suggests that there is likely to be very little preventing further yen gains with USDJPY expected to resume its down trend. However, note that the latest data from the US Treasury shows that Japan bought a net USD105bn of US debt in August. However, these purchases are taking place on a currency hedged basis and with the continued hedging of existing portfolios we view a USDJPY rebound in to the 91.00 area as providing a
USDJPY selling opportunity targeting the 88.00 October lows. USDJPY remains vulnerable within the context of the renewed volatility in the bond market. The weaker US labour market report on Friday triggered initial sharp decline in 10Y bonds yield dragging USDJPY lower, a break and close below near-term support of 90.00 is bearish for the pair.