Daily Morning Report 06.02.2017

Daily Morning Report 06.02.2017

Japan’s former currency czar Eisuke Sakakibara said the dollar could fall below 100 yen by year-end as U.S. President Donald Trump’s perceived support for a weak dollar helps slow the pace of interest rate hikes by the Federal Reserve.

Sakakibara, who was known as “Mr Yen” in the 1990s when he led currency intervention to stem yen appreciation, said Japan should not intervene if yen gains are gradual, noting that Japanese firms with production bases overseas will benefit from a stronger yen.

Even if yen rises are rapid, Japan cannot intervene as doing so will not be supported by the United States, Sakakibara, now a professor at Aoyama Gakuin University, told Reuters in an interview on Monday.

Trump’s U.S. election victory in November initially brought benefits to Japan as dollar gains fueled by hopes for his stimulus policies weakened the yen in a boon to its exports.

But his recent criticism against a weak yen has turned him into one of the biggest risks to Japan’s export-reliant economy, with the dollar hitting a two-month low of 112.08 yen last week.

Trade and currency policy are likely to be high on the agenda during the summit between Prime Minister Shinzo Abe and Trump later this week. The president has criticized the lack of access to the Japanese auto market for U.S. producers and said Tokyo is using monetary policy to devalue its currency.