After starting the week quietly, the Japanese Yen has declined against both the Pound (GBP/JPY) and US Dollar (USD/JPY) today.
Although Friday’s US growth data came in below forecasts, the expectation that the Federal Reserve will still be the first major central bank to increase interest rates in 2015 supported risk appetite and the safe-haven Yen failed to post any notable gains following the report’s release.
Yen movement was also limited on Monday despite Japan posting a sturdy Manufacturing PMI print of 52.2 in January (up from a previous estimate of 52.1).
Over the next couple of days the Yen fluctuated against the US Dollar as North American data (from ISM Manufacturing to Factory Orders) fell short. The USD/JPY pairing moved between the 117 and 118 Yen level.
However, the Japanese currency steadily lost ground against Sterling as the British asset was supported by a solid set of Purchasing Managers’ Indexes. After dipping to a low of 176 Yen on Tuesday, the GBP/JPY currency pair proceeded to advance to 179 Yen ahead of the Bank of England’s interest rate decision.
The appeal of the Yen waned during the local session as the Japanese government put forward a pro-easing candidate to join the Bank of Japan’s policy board.
While BOJ Governor Haruhiko Kuroda has long been an advocate of more radical stimulus measures, other members of the board have resisted action. With the new nominee, academic Yutaka Harada, in his corner, Kuroda might be more successful in pushing through policy changes.
Aggressive stimulus measures, such as those introduced in 2013 and 2014, tend to weaken the Yen so the development did little to support the currency.
Economist Kyohei Morita said of the move; ‘Harada is regarded as a reflationist who seeks to extricate Japan from deflation by boosting the economy through bold monetary policy.’
Further Yen movement could occur before the weekend as Japan publishes its Coincident Index and Leading Index for December. Both gauges are expected to show improvement.
Friday’s US Non-Farm Payrolls report may also inspire Yen movement. Wednesday’s ADP Employment Change data showed that the US economy added fewer positions than forecast in January. If the payrolls figure is also below estimate, it could push back Federal Reserve rate hike bets, reduce demand for the US Dollar and initiate a Yen uptick.
On Thursday the US Dollar to Japanese Yen (USD/JPY) exchange rate was trading in the region of 117.3200
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate was trading in the region of 178.2300