Japanese Yen Rallies Despite Negative Domestic News

The Japanese yen climbed against other most-traded currencies today despite domestic news that was not favorable to the currency. Some market analysts explained the rally by risk aversion among investors.
Markit reported that the Jibun Bank Japan Manufacturing Purchasing Managers’ Index was at 49.4 in July, almost unchanged from June’s figure of 49.3. Being below the neutral 50.0 level, the indicator was showing a decline of the sector. The report commented on the reading:

Latest manufacturing PMI data did little to suggest that the worst has passed for the global goods-producing sector. Japanese manufacturers cut output for the seventh consecutive month amid soft demand from domestic and overseas clients.

Bank of Japan Deputy Governor Masayoshi Amamiya signaled that the BoJ is ready for additional monetary easing after the US Federal Reserve cut its interest rates. He said:

The bank is no different from other major central banks, in that it is prepared to take, if necessary, policy responses in order to prevent the risks from materializing, while closely monitoring them.

Risk aversion surged on markets after a surprise tweet from US President Donald Trump about additional tariffs on Chinese goods. That increased investors’ demand for safer assets.
USD/JPY sank from 108.77 to 107.45 as of 19:36 GMT today. EUR/JPY tumbled from 120.46 to 119.12. GBP/JPY slumped from 132.23 to 130.43.

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