The Japanese yen was very weak today. In fact, it logged losses against all other most-traded currencies. Domestic macroeconomic data was decent, therefore it could not be the reason for the weakness. Dovish comments of the central bank’s deputy governor, on the other hand, could.
The Bank of Japan reported that the monetary base expanded by 16.5% in November from the same month of the previous year after rising by 16.3% in October. Economists were expecting a slightly bigger increase of 17.2%. Data from Japan’s Cabinet Office showed that the Consumer Confidence Index was at 33.7 in November, seasonally adjusted. While it was just a nominal increase from the previous month’s figure of 33.6, the actual reading was noticeably better than the median forecast of 33.0.
BoJ Deputy Governor Masayoshi Amamiya was speaking about Japan’s central bank monetary policy today, signaling that the bank can make the policy even more accommodative if necessary:
The BOJ will closely watch the impact of COVID-19 (on the economy) for the time being and take additional easing steps without hesitation as needed.
Analysts were almost certain that the BoJ will extend its coronavirus relief measures beyond the March deadline at the December policy meeting, and the deputy governor suggested that it is indeed a likely outcome:
Will extend the duration of COVID-response measures beyond March deadline as needed, with an eye on pandemic impact on economy.
There are no events on the Japanese macroeconomic calendar scheduled for the rest of the week, so the yen will be reacting to events outside of Japan. In particular, US nonfarm payrolls and news about coronavirus vaccines should be the major drivers for the currency’s performance.
USD/JPY rallied from 104.31 to 104.52 as of 8:05 GMT today. EUR/JPY rose from 125.90 to 126.18. GBP/JPY declined from 139.98 to 139.77, retreating from the session maximum of 140.44.
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