Prime Minister Yoshihide Suga extended the state of emergency covering some parts of Japan late last week. Fukuoka and Aichi have been added to Tokyo, Kyoto, Osaka, and Hyogo as regions affected, while Miyagi Prefecture is no longer under coverage. While Dollar/Yen, Yen rate, and Yen basis have reacted to weak U.S. jobs numbers that fell short of expectations and plunging U.S. high-tech stock prices, the reaction to that as well as the extension of the state of emergency has been muted in the face of Yen selling flows.

In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects Japan’s April monetary base and fiscal balance, as well as discusses May fiscal fund flows. He also shows his views for Dollar/Yen, Yen rate, and Yen basis.

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Is the US dollar still tied to the 10-year Treasury yield? Despite plunging on Friday, the 10-year yield is slightly higher this week.

Derek Halpenny, Head of Research Global Markets EMEA and International Securities, offers context and outlook for USD amid weaker than expected US Non-Farm payroll figures.

Derek also reflects on the Bank of England monetary policy report and provides his views for G10 currencies following UK elections last week.

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Japan remained under a state of emergency in some designated areas during the Golden Week holidays. Dollar/Yen and JPY rates have traded in narrow ranges, edging up slightly, and the Nikkei Average also lacks momentum. JPY basis has tightened considerably. Arbitrage trading among foreign investors was active as Japanese investors were on holiday. Cross-border factors are more likely to impact JPY asset volatility than domestic factors as monetary easing continues around the world.

In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews the Bank of Japan’s April policy meeting, discusses adjustments to the coordinated global central bank effort to supply U.S. Dollar funds, and takes listeners through relative value in cross-border security investments. He also shares his views for Dollar/Yen, Yen rate, and Yen basis.

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While investor confidence in reopenings is rising across developed markets, the sentiment is more mixed in emerging markets given COVID-19 resurgence and vaccine rollout challenges. Nevertheless, this de-synchronisation still matters considerably for emerging markets that depend heavily on exports.

Ehsan Khoman, Head of Emerging Markets Research (EMEA), frames the prospects for emerging markets exports upon reopenings, offering insights into the speed, magnitude and differentiation across economies, as markets gradually begin to form new contours towards a post-virus equilibrium.

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As positive COVID-19 data points to the effectiveness of the vaccine roll-out, confidence in the bounce back of the UK economy is growing. Will this mean an upgrade to GDP forecasts at the Bank of England policy update this week?

Lee Hardman, currency analyst at MUFG, outlines what to expect from the update, including outlook for the pound and Quantitative Easing (QE) purchases. Lee also touches on the upcoming Scottish Parliament elections – could another independence referendum be on the cards?

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Environmental, Social, and Corporate Governance (ESG) investing remains a nascent asset class across emerging markets. As investors put ESG more at the centre of their asset allocation decisions – especially if “values-based” rather than “risk-based” investing becomes more marked – then high yielding emerging markets at the weaker end of the credit spectrum might find it challenging to access capital which in-turn could raise the price of funding for these countries.

Ehsan Khoman, Head of Emerging Markets Research (EMEA), contextualises the ESG conundrum facing high yielding emerging markets and believes that more government and multilateral engagement will be required to safeguard capital flows.

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Japanese lifers released their investment strategy plans for FY21 last week. In 2H FY20, amidst the COVID-19 pandemic, U.S. and Japanese rates reversed course and rose as stock market volatility picked up around the world. USD started to weaken and hedging costs remained low and stable after USDJPY basis tightened, as Japanese investors showed a greater focus on yield and bought more U.S. Government agency and corporate bonds with their Treasury redemptions. Japanese investors’ investing flows will be a critical catalyst for global yields and JPY basis. 

In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses key points with Japanese lifers’ 1H FY21 investment strategies including the impact on individual USD, EUR, and JPY asset classes as well as discusses dynamics in the JPY Samurai bond market and key points for the near term. He also outlines his views for Dollar/Yen, Yen rate, and Yen basis.

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The upcoming Federal Open Market Committee (FOMC) meeting is what investors are eyeing this week, according to Derek Halpenny, Head of Research for Global Markets EMEA and International Securities.

Derek outlines what to expect, taking into account recent comments made by Fed Chair Powell which indicate a shift in communication strategy, with a move towards emphasising guidance on rates, as opposed to tapering.

He also touches on how global COVID-19 infection rates and U.S. corporate earnings will impact the markets.

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Since the onset of the pandemic, some of the most aggressive monetary easing cycle in Emerging Market (EM) history have taken rates to zero bound in many cases, and historic lows in many more. But is the tide now turning?

Most EM central banks are becoming increasingly hawkish, with Brazil, Russia, Turkey and Ukraine all raising rates recently with Nigeria and South Africa likely following suit shortly.

Notwithstanding some notable exceptions, Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that a confluence of rising yields in developed markets, particularly U.S. yields, higher commodity prices proving increasingly inflationary, pandemic-induced supply shocks and country-specific idiosyncrasies, all signal that the hawkish noise amongst major EM central banks will grow louder in the months ahead.

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Japanese Prime Minister Yoshihide Suga visited the U.S. this past weekend. It was his first face-to-face meeting with U.S. President Biden in Washington D.C. Then, U.S. and Chinese officials issued a joint statement after talks on climate change in Shanghai, China. On April 16, the U.S. Treasury released its semi-annual report on currencies, avoiding naming countries, including China, as currency manipulators. So far in April, Dollar/Yen and Yen rates have dipped slightly, while narrowing pressure on Yen basis has picked up.

In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the outlook for Japanese corporate foreign direct investment, February U.S. TIC data, and cross-border securities investing flows in the Tokyo markets so far in April. He also shares his views for Dollar/Yen, Yen rate, and Yen basis.

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