Japanese Yen Jumps on Safe-Haven Demand, Capped by Poor Data

The Japanese yen is strengthening against a handful of currency rivals on Thursday as investors pour into safe-haven assets amid the coronavirus outbreak. Japan, which has experienced an uptick in Covid-19 cases, reported disappointing manufacturing and non-manufacturing data that might force the country into a recession. The big test over the medium-term is if Tokyo will still be able to host the Summer Olympics, an event that was expected to stimulate the world’s third-largest economy.

The Jibun Bank Services purchasing managers’ index (PMI) plunged to 46.8 in February, down from 51 in January. This represents the steepest fall since April 2014 as new orders fell to a nine-year low and job creation slumped to a three-month low. Business confidence fell to a four-year low as companies are bearish on the impact of the coronavirus, the aging population, and global competition.
The Jibun Bank Composite PMI also tumbled to 47.0 in February, down from 50.1 in the previous month. This was also the biggest drop in six years as firms were affected by a reduction in tourism.
In the week ending February 29, stock investments by foreigners in Japan declined $6.98 billion, which is the third consecutive weekly decline. Bond investments held by Japanese investors abroad decreased $4.58 billion.
Meanwhile, the Japanese government is considering a plethora of options to battle the coronavirus outbreak. Health authorities are thinking about quarantining visitors from China and South Korea for two weeks, and Prime Minister Shinzo Abe has been given the power to declare a state of emergency. These might be important developments as experts say the infection rate is the “tip of the iceberg” and more testing should be done.
The Bank of Japan (BoJ) confirmed earlier this week that it is ready to initiate monetary policy accommodation efforts to cushion stocks and ensure the economy can weather the storm.
In recent weeks, there has been a lot of speculation about the Tokyo Games this summer. The International Olympic Committee (IOC) has confirmed it is sticking with Japan, and Japanese officials say they might move up the event for precautionary reasons. For now, you can anticipate the festivities to happen in July.
Japan presently has 1,000 cases, including more than 700 from a cruise ship. The global death toll has topped 3,500 and confirmed cases have surpassed 95,000.
The USD/JPY currency tumbled 0.77% to 106.70, from an opening of 107.53, at 14:04 GMT on Thursday. The EUR/JPY slipped 0.25% to 119.44, from an opening of 119.74.

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