FX Action: The yen has seen some of its safe haven premium unwind
FX Action: The yen has seen some of its safe haven premium unwind amid a backdrop of rising sovereign bond yields, solid rebound on European equity bourses and with S&P 500 showing a near 1% gain, pointing to a strong opening rally on Wall Street. USD-JPY has vaulted back to near 106.50, which is nearly 50 pips up on the Tokyo low. AUD-JPY and other yen crosses have also posted gains, though most remain below recent highs, as has USD-JPY. The yen has seen a choppy week and will remain prone to volatility should there be continued flip-flopping between risk-off and risk-back-on sentiment, which seems likely as hopes for more central bank stimulus vies with fears that a number of major economies are simultaneously heading for recession, with a number of developing-world economies with high dollar debt levels are particularly exposed to the shifting financial cycle. Given these fears, further conciliatory remarks are likely from both China and the U.S. with regard to their trade spat, which may help maintain investor spirits, for now, and keep USD-JPY underpinned.