With foreign exchange market risk appetite improved and Japanese data persistently weak the Japanese Yen ceded ground to the US Dollar ahead of the weekend.
Monday's foreign exchange investors found the US dollar to yen exchange rate advancing, trending at the best conversion levels seen in around five weeks.
Although Japanese Industrial Production did not contract as far on the year as investors had anticipated this did not offer any support to the Japanese Yen (JPY).
Demand for the US Dollar (USD), meanwhile, remained bullish as markets continue to price in the increased odds of an imminent Fed rate hike, encouraged by hawkish commentary from St Louis Fed President James Bullard.
Scotiabank's latest research suggest the analysts see a continuation in the USD/JPY appreciation in the near-term:
USDJPY is struggling with near-term resistance around 111.50, however we maintain a bias to continued gains with 111.80 and 114. Momentum is bullish, the RSI (59) leaves ample room for further upside, and DMI’s are still relatively muted. We look to support at the 9 day MA (110.19).
Both the US and Japan stand to influenced by manufacturing data tomorrow. Japan’s medium-impact PMI announcement will come first; it previously printed at 47.6. The US’s variant is forecast to remain at 50.5 points, on the edge of the contraction range.
In spite of a recent resistance to weak economic data the Japanese yen exchange rates (JPY) softened on Friday in response to the latest Consumer Price Index, which showed that domestic inflation had fallen from -0.1% to -0.3%.
This suggested that the Bank of Japan’s (BoJ) recent monetary easing has had a negligible impact on the Japanese economy, if any, raising the question of further action in the near future.
The appeal of the US Dollar was improved, meanwhile, by an upward revision in the first quarter US GDP, which bolstered the US Dollar to Japanese Yen (USD/JPY) exchange rate as the odds of an imminent Federal Reserve rate hike seemed to increase.
Latest Dollar/Yen Exchange Rates
On Saturday the Japanese Yen to British Pound exchange rate (JPY/GBP) converts at 0.005
At time of writing the pound to japanese yen exchange rate is quoted at 197.429.
Today finds the pound to pound spot exchange rate priced at 1.
FX markets see the pound vs swiss franc exchange rate converting at 1.142.
NB: the forex rates mentioned above, revised as of 27th Apr 2024, are inter-bank prices that will require a margin from your bank. Foreign exchange brokers can save up to 5% on international payments in comparison to the banks.
Other Foreign Exchange News
Japanese Yen (JPY) Exchange Rates Soften on Decline in Safe Haven Currency Demand
Japanese data in recent days has proved decidedly underwhelming, adding weight to concerns over the outlook of the domestic economy even as the Yen remained generally strong.
While a decline in safe-haven demand had allowed the Yen to weaken towards the end of the week the underlying trend of the currency remains bullish, as Dr Jörg Krämer, Chief Economist at Commerzbank noted:
‘A weaker currency is likely to be the only effective way for the BoJ to achieve its inflation target as neither consumption nor wages are picking up noticeably. The likelihood that the BoJ will take further measures to weaken the JPY effectively is therefore high. The timing is uncertain though. As long as the FX market doubts that the BoJ is prepared to implement additional measures, JPY is set to appreciate.’
Although Tuesday’s Industrial Production figures are forecast to show a renewed contraction, therefore, this is unlikely to put particular pressure on the defiantly buoyant Yen.
Concerns over US Growth Failed to Weigh on US Dollar (USD) Exchange Rates
Despite the seemingly positive nature of Friday’s US GDP data there remain some reservations amongst investors that the world’s largest economy is strong enough to justify an imminent resumption of monetary tightening.
As forecasts point towards a similarly weak level of growth in the second quarter there is increasing scepticism that the Fed can justify raising interest rates in June, particularly as recent manufacturing data has been largely disappointing.
Nevertheless, the general market reaction did not pay heed to these concerns, with the USD/JPY exchange rate ending the week on a bullish trend as investors piled back into the strengthening ‘Greenback’.
Stronger Personal Consumption, Payrolls Figures to Increase Fed Hike Bets
While further hawkish commentary from members of the Federal Open Market Committee (FOMC) could offer additional support to the US Dollar markets are expected to place more importance on upcoming ecostats.
Of particular importance will be the April Personal Consumption Expenditure Core figure and the May Non-Farm Payrolls report, which could prompt more pronounced ‘Greenback’ volatility.
Should Friday’s jobs and wage data demonstrate further strength then the odds of a June rate hike would be sharply increased, allowing the USD/JPY exchange rate to extend gains in spite of any market reservations.
Short-Term USD/JPY Exchange Rate Forecast
Scotiabank's latest research notes the potential for the US dollar to yen exchange rate to rise in their short-term forecast:
"USDJPY remains unable to break from congestion around the 50 day MA (109.81)."
"We note the sequence of lower highs from last Friday alongside the apparent formation of a symmetrical triangle."
"These are typically resolved via continuation and would suggest upside risk for USDJPY."
"We maintain a bias to 111.50 however we await a sustained break of 110.50."
"Near-term support has been observed around 109.50."