US Dollar Exchange Rate Gains Against Yen (USD/JPY); Safe Haven Demand Declines
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The US Dollar is trading amid the escalating Iraq situation, but whilst investors initially sought safe haven currencies such as the Yen, risk appetite is returning in the currency market causing the Yen to fall.
Bank of Tokyo Mitsubishi UFJ representative Yasuaki Amatsu commented: ‘As the geopolitical factors have been factored in, the market continues to see a retreat of risk-off moves, which supported Dollar-buying sentiment against the Yen.’
Furthermore, this week will see the release of highly influential figures by way of Wednesday’s US Advance Retail Sales and Friday’s University of Michigan Confidence statistics.
Currency expert Valentin Marinov stated: ‘Geopolitics appears to be taking a back seat for now, and focus is back on data. US growth outlook has improved. The Dollar could remain supported in the absence of significant disappointments from the upcoming US data this week.’
Monday saw an interesting day for the Yen with Japanese Consumer Confidence figures failing to attain economists’ forecasts. Predictions to meet 42.0 index points were thwarted with the actual figure only attaining 41.5 in July; still higher than June’s 41.1, but not as high as economists had hoped.
Furthermore Machine Tool Orders which is used to indicate business capital spending expanded in July, reaching 37.7%, more favourable than June’s 34.1%.
However Tuesday has seen the release of the Japanese Domestic Corporate Goods Price Index which has shown a less than forecast rise in goods prices. Month-on-month the Index only grew by 0.3%, undercutting economists 0.4% forecast; year-on-year the figure rests at 4.3% in July, short of the predicted 4.4%.
Economist Hideo Hayakawa commented: ‘What could happen in Japan is a situation where low economic growth and higher inflation coexist. That could happen due to capacity constraints that will put upward pressure on wages and prices, even when the economy is weak.’
Wednesday is expected to show Advance Retail Sales figures for July rise by 0.2%, following a 0.2% rise in June also.
The US Dollar however could rally if the data proves favourable, even more so if the figures surprisingly jump higher as some have done in recent weeks. Moreover, the Yen looks to descend lower as risk aversion settles, allowing the safe haven currency to fall.
Currency expert Thomas Averill commented: ‘There’s no real reason why the Yen should be strong apart from risk aversion. I think it’s just a little bit of an unwind of the risk-off selloff that we saw last week.’
The US Dollar to Japanese Yen exchange rate looks set to remain bullish in the currency market, following a reduction in geopolitical tensions. However, the ‘Buck’ can expect to be greatly affected by the data releases this week, and will lose popularity if any unfavourable data escapes the US economy.
The current Yen to US Dollar exchange rate is trading down at 0.0098.