Lee Hardman, Currency Analyst at MUFG, notes that the yen has remained relatively stable in the Asian trading session with USD/JPY continuing to find technical support at the 112.00-level in the near-term. Key Quotes “The pair has attempted and failed to close below the 112.00-level on five occasions over the last couple of weeks. The recent loss of upward momentum for the yen has coincided with a relief rally for global risk assets. The tentative improvement in global investor risk sentiment has continued overnight resulting in the S&P500 index rising to its highest level since the 8th January and reversing just over half of its decline from earlier this year. The ongoing improvement in global investor risk sentiment in part reflects investor optimism ahead of today’s G20 meeting that world leaders will provide reassurance that they will take action to help support global growth and dampen downside risks. We do not expect any major policy announcements which should have limited impact on the foreign exchange market. PBoC governor Zhou has provided some reassuring comments ahead of the G20 meeting stating that “there is no basis for persistent renminbi depreciation from the perspective of fundamentals” and that “short-term market volatility will give way to economic fundamentals. He stated as well that “China still has some monetary policy space and monetary policy tools to address potential downside risk”. Chinese Finance Minister Lou Jiwei has stated as well that “China still has room to loosen fiscal policy”. Building expectations for further policy easing from China are helping to support commodity currencies in the near-term especially the Australian dollar and Latam currencies. Yen strength is also in part dampened by building expectations for further BoJ monetary easing ahead of the summer elections. The release overnight of the latest CPI report from Japan highlights that the BoJ remains under pressure to deliver further easing. The report revealed that inflation pressures eased in January. The annual rates of Japanese style core (excluding fresh food) inflation and the core excluding fresh food and energy inflation measures both eased to 0.0% and 1.1% respectively. However, the forward leading Tokyo CPI measures did provide some reassurance for the BoJ revealing an unexpected firming of inflation pressures in February. Still if the yen remains stronger and the price of oil lower it is likely that the Japanese style core inflation measure will fall back into negative territory acting as a potential catalyst for further easing.” For more information, read our latest forex news.