The Japanese Yen advanced on the Pound and remained trading in a narrow range against the US Dollar on Monday. The GBP/JPY pairing dipped to a low of 182.5800 before returning to trend in the region of 182.9600.
The GBP/JPY pairing fluctuated between highs of 184.1748 and lows of 181.6063 over the course of last week as demand for the British currency was variously undermined by weak domestic inflation data and supported by unexpectedly UK strong employment figures.
Of course, the Greek debt negotiations also had an impact on the safe-haven Yen, as concerns that Greece would fail to reach an accord with its creditors reduced the appeal of higher-risk assets.
Although improved Bank of England (BoE) rate hike expectations kept the Pound supported against peers like the Euro on Monday, Sterling softened against the Yen as investors bet that the Bank of Japan (BOJ) will refrain from introducing additional stimulus measures in the near future.
According to Etsuro Honda, one of Prime Minister Shinzo Abe’s advisors, the Yen has softened to such a level that the BOJ can refrain from expanding stimulus measures for the time being.
It will take several months for the effects of the support introduced in the fourth quarter of last year to be felt, so Honda believes ‘the BOJ can wait until at least June to gauge the impact.’
In Honda’s opinion, the Yen trading between 117 and 120 per Dollar should be regarded as ‘a comfortable level’ for the domestic economy as ‘the weak Yen should help boost consumer spending eventually as higher corporate profits will filter through to wage growth […] There’s no good reason to apply additional easing now. At the same time, the BOJ shouldn’t let concern about weakening the Yen further stop it from expanding policy if needed.’
However, the Yen did experience modest fluctuations during the Australasian session as minutes from the latest BOJ policy meeting showed that three policymakers don’t believe the central bank is going to achieve its inflation target due to a global easing in price pressures and the drop off in oil.
Japanese data also showed that supermarket sales fell by -1.7% on the year in January – a slight improvement on the -1.8% figure recorded in December.
As it stands, the US Dollar to Japanese Yen (USD/JPY) exchange rate is trading between 119.3500 and 118.8500.
In the week ahead the Japanese reports with the most potential to inspire Yen volatility include the nation’s Small Business Confidence measure, the National Consumer Price Index, Household Spending figures, Japan’s Unemployment Rate and Industrial Production figures and Construction Orders data.
A marked slowing in domestic inflation would increase the odds of the Bank of Japan expanding stimulus measures sooner-rather-than-later and could put some downward pressure on the Yen.
During the European session the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate was trading in the region of 183.0000.