BUZZ-COMMENT-Yen burnishes haven credentials

The yen is benefiting from more haven interest as risk sentiment and inflation expectations worsen, though it may be difficult to maintain its recent pace of gains versus the dollar.

USD/JPY is under pressure toward month-end as U.S. growth concerns and falling oil prices send Treasury yields lower for a fifth day. The prospect of U.S. government budget cuts and looming tariffs continue to dampen risk-taking, leading to declines in U.S. equity indexes and boosting odds of a May Fed rate cut.

Growth concerns are also becoming evident in inflation breakevens and commodity indexes. Five-year breakeven inflation measures in the U.K. and Germany remain under pressure after peaking in mid-January while U.S. inflation breakevens appear to have peaked last Thursday. In contrast, Japan's breakeven inflation rates have been steadily climbing for years, with the five-year rate at 1.93%, surpassing Germany's.

The combination of equity market weakness and ongoing inflation concerns in Japan is boosting demand for yen call options and driving the Japanese currency higher against its risk-sensitive peers. USD/JPY risk reversals are wider across tenors, with the one-year tenor showing at its most bearish position since October. AUD/JPY, a global growth barometer, is down nearly 1%.

USD/JPY also remains under pressure, having already fallen below its December low of 148.65. However, losses may slow as it nears the 100-week moving average at 148.55 and the lower daily Bollinger band at 148.42. Further support is seen at the Sept. 3 high of 147.20.

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