Japanese Yen Firm on PMI Figures, Cautious Market Sentiment

The Japanese yen was firm today as the market sentiment turned cautious. Some of domestic macroeconomic releases were also helpful to the currency.
Japan’s Flash Manufacturing PMI edged up by notch from 49.4 in July to 49.5 in August. Analysts had expected a bigger increase to 49.8. The Flash Services Business Activity Index demonstrated a far bigger improvement, climbing from 51.8 to 53.4. Joe Hayes, economist at IHS Markit, commented on the result:

Preliminary August PMI data give plenty of promise that the solid growth trend seen in the GDP outturns so far this year could indeed stretch into the third quarter, providing a timely boost before the fourth quarter, which is likely to be adversely impacted by the consequences of sales tax hike.

Released separately, the All Industry Activity Index fell 0.8% in June after rising 0.5% in May. The actual reading was in line with forecasts.
Traders became more cautious after yesterday’s release of monetary policy meeting minutes by the Federal Reserve. The notes showed that the Fed is not on “a preset course”, meaning that an interest rate cut in September is not guaranteed. And if it does not happen, that shatters hopes for more cheap money and more capital inflows into emerging economies.
USD/JPY edged down from 106.61 to 106.47 as of 15:19 GMT today, touching the low of 106.25 intraday. EUR/JPY slipped from 118.16 to 118.02, while its daily minimum was at 117.73. CHF/JPY dropped from 108.47 to 108.20.

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