The Japanese yen attempted to rally intraday but has lost is gains completely against all other major currencies by now. One of the possible reasons for the initial rally of the yen was the worsening market sentiment as traders were becoming less and less optimistic about the trade negotiations between the United States and China. But poor domestic macroeconomic data and the dovish outlook for monetary policy of the Japanese central bank did not allow the currency to continue rising.
The Bank of Japan released a rather optimistic economic assessment for all of the country’s regions, stating that all of them are either expanding or recovering. The central bank said that domestic consumption should outweigh the negative impact of the global economic slowdown and trade wars:
Domestic demand has continued on an uptrend, although exports, production and business sentiment have been affected by a slowdown in overseas economies. A virtuous cycle from income to spending remains intact at both the corporate sector and households.
Nevertheless, BoJ Governor Haruhiko Kuroda stressed that the central bank is ready to implement additional monetary stimulus in case if risks threaten momentum towards the central bank’s target of 2% inflation, saying:
We need to pay closer attention to the possibility that momentum towards achieving our price target will be lost.
Today’s macroeconomic data did not support the positive picture of the Japanese economy painted by the BoJ. Japan’s Ministry of Economy, Trade, and Industry reported that the Index of Tertiary Industry Activity in August from the previous month on a seasonally adjusted basis, missing the consensus forecast of a 0.6% increase. The Index of Industrial Production dropped 1.2% in August from the previous month on a seasonally adjusted basis, matching forecasts.
USD/JPY gained from 108.39 to 108.66 as of 14:39 GMT today, rebounding from the daily low of 108.15. EUR/JPY went up from 119.52 to 119.77 after touching the low of 119.10 intraday. GBP/JPY surged from 136.63 to 138.37, trading near the highest level since May 30. CHF/JPY was up from 108.67 to 108.82 following the earlier drop to the session minimum of 108.38.
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