Japanese Yen (JPY) Exchange Rate Stronger against GBP, USD in Risk-Off Environment
With the US and European Union preparing to introduce additional sanctions against Russia and tensions regarding the Ukraine situation steadily mounting, the safe-haven Japanese Yen (JPY) retained last week’s gains and was stronger against the British Pound (GBP) and US Dollar (USD).
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In the view of one Shanghai-based analyst; ‘If there’s no change in basic economic policy then it’s likely there won’t be any strong measures, and overall this is dragging on expectations.’
The Yen posted a modest five-day gain of 0.3 per cent against the US Dollar last week, but the Japanese currency’s upward momentum was restrained by domestic concerns.
Last week’s Japanese inflation data added to the case for the Bank of Japan introducing additional stimulus in the near future. If the central bank does take action at its upcoming meeting the Yen could slide.
The Asian asset tumbled to record lows last April after the BOJ attempted to tackle persistent deflation with an unprecedented level of easing.
So, as pointed out by Toshiya Yamauchi; ‘The intensifying situation in Ukraine propelled stock selling and Yen buying. [But] The Yen’s gains will be limited before the Bank of Japan meeting.’
However, the Yen was moderately supported overnight by some upbeat domestic reports.
Japan’s large retailers sales data showed a 16.1 per cent increase in March, considerably more than the 13.8 per cent gain expected.
Retail trade advanced by 11 per cent in March, year-on-year, in line with economists’ expectations and up from an annual gain of 3.6 per cent in February.
In the week ahead the Japanese reports to look out for include; the Bank of Japan’s 2014 Monetary Base Target announcement, Markit manufacturing PMI, industrial production, housing starts, small business confidence, household spending and jobless rate figures.
Developments in Ukraine will also have a significant impact on the Yen’s performance over the next few days, and investors will be looking ahead to Friday’s highly-influential non-farm payrolls report.
If the US economy is shown to have added the 210,000 positions expected by economists the ‘Greenback’ could advance on the majority of its currency counterparts, including the Yen.
An employment gain of that size would drive the US unemployment rate to 6.6 per cent from 6.7 per cent.
Before Friday, the Federal Open Market Committee will be delivering its rate decision.
The US Dollar will continue to receive underlying support if the FOMC continues with the steady tapering of stimulus.
Further ‘Greenback’ volatility could be occasioned if the central bank offers any hints regarding the possible raising of interest rates.
The US Dollar is currently trading against the Yen in the region of 102.3400.
British Pound is currently trading against the Yen in the region of 172.3410.