Yen Acts As Safe Haven Amid Covid Jitters

The yen garners strength on the back of broader flight to safety inspired by the detection of a new Covid-19 variant in South Africa. The variant carries an unusual number of mutations, which has fuelled concerns over its potential to evade immunity. It must be stressed that there is considerable uncertainty around the new variant and it is too early to tell what might be the long-term consequences of its emergence.

• USD/JPY has shed 50 pips so far, which leaves the pair at Y114.87. The key near-term support is provided by Nov 19 low of Y113.59 and a break here would expose the 50-DMA at Y113.12. Bulls would be pleased by a recoil above Nov 24 cycle high of Y115.52 towards Jan 11, 2017 high of Y116.87.
• Headline Tokyo CPI inflation registered at +0.5% Y/Y, marginally above median estimate, with the widely watched core CPI printing in line with expectations.
• Worth noting that the newest BoJ Board member Nakagawa told foreign press that local consumer prices "don't look like they will stay around zero forever" and said that she sees strengthening upward pressure.
• On the currency front, Nakagawa said that the most desirable outcome is for the currency to "reflect economic fundamentals and move in a stable manner."
• Japan's docket for next week includes unemployment & flash industrial output (Tuesday) as well as capex & company profits/sales (Wednesday).