MUFG Research discusses USD/JPY outlook and flags a scope for downside pressure from a potential section 301 trade inquiry.
"USD/JPY has come down the past two weeks from its 6-month ceiling around 109.50 and yesterday it tested the 108.25 level. This has been driven by increasing market pessimism on US-China trade, as mixed signals emanating from both sides make it unclear whether there will be a Phase One trade deal signed off before the end of this year. Our East Asian Head of Global Markets Research Cliff Tan believes that the case has grown for a further delay," MUFG notes.
"Further support for the yen may be waiting in the wings in an alternative to the investigation into auto tariffs done under Section 232 of the US Trade Expansion Act of 1962. President Trump had until the 13th of November to decide whether to apply tariffs on auto imports which would have had a particularly significant impact on carmakers in the EU, following the finding by the US Commerce Department that auto imports could pose a threat to national security," MUFG adds.