Japanese Yen Strong After Economic Data Meets Expectations

The Japanese yen was generally strong today amid persisting concerns about the US-China trade negotiations. Macroeconomic data released in Japan over Friday’s session was in line with expectations.
The Statistics Bureau of Japan reported that Japan’s core Consumer Price Index rose by 0.4% in October from a year ago, matching analysts’ forecasts. Inflation accelerated slightly from September’s annual rate of 0.3%. Month-on-month, the CPI rose by 0.2%.
Markit released a flash report on Japan’s manufacturing and services PMIs in November. The manufacturing Purchasing Managers’ Index rose to 48.6 from 48.4 in October. The Services Business Activity Index climbed to 50.4 from 49.7. Joe Hayes, economist at IHS Markit, commented on the result:

October PMI data was difficult to interpret as a result of the temporary negative shocks caused by the sales tax and typhoon. However, we can now deduce from the November PMI data that there is a strong possibility of Japan’s economy contracting in the fourth quarter. We have seen little rebound following these temporary factors, especially in the service sector where the impact of the tax rise and poor weather was most prominent.

Meanwhile, the Sino-US trade conflict continues to be the main driver for markets. Chinese President Xi Jinping voiced a desire to reach a “phase-one” deal with the United States, saying:

We want to work for a phase one agreement on the basis of mutual respect and equality. When necessary we will fight back, but we have been working actively to try not to have a trade war. We did not initiate this trade war and this is not something we want.

USD/JPY slipped from 108.62 to 108.54 as of 13:11 GMT today. EUR/JPY declined from 120.10 to 120.01, retreating from the daily high of 120.48. GBP/JPY declined from 140.17 to 139.58.

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