As a fresh week of trading got underway, the Yen dipped against several of its most-traded counterparts as demand for safe-haven assets eased and Japan’s Nomura Manufacturing PMI declined.
Over the course of last week the US Dollar to Japanese Yen exchange rate advanced from a low of 118.6465 to a high of 119.9305.
The Japanese Yen edged lower against the ‘Greenback’ as domestic inflation data provoked speculation on the subject of additional easing from the Bank of Japan (BOJ).
Last week’s Japanese Consumer Price Index (CPI) showed that inflation slipped for a sixth consecutive month in January, printing at 2.2% on the year following December’s annual figure of 2.5%.
Separate domestic reports revealed stronger-than-anticipated industrial output but reduced household spending.
Furthermore, the appeal of safer assets like the Yen was tempered by the continuation of the tentative ceasefire in Ukraine and the approval of the four-month Greek bailout extension.
While some investors still envisage the central bank introducing further stimulus measures to support the domestic economy, recent comments from several BOJ officials have taken away some of the threat of immediate action.
Most recently The BOJ’s Deputy Governor Hiroshi Nakaso asserted that the Japanese economy is back on track and that the central bank is on course to achieve its inflation target of 2%.
However, today’s Japanese Manufacturing report was slightly disappointing. Although the gauge showed the fastest pace of manufacturing production for almost a year, it also declined from 52.2 in January to 51.6 in February.
Markit economist Amy Brownbill said of the result; ‘Operating conditions continued to improve in the Japanese manufacturing sector in February. Production increased at the fastest pace since before the sales tax increase in April 2014, while new orders remained in moderate growth territory. Subsequently, manufacturers hired additional staff, although at a weak rate.’
She also made reference to the mixed impact of a softer Yen, stating; ‘Meanwhile, the depreciation of the Yen led to increased international trade, as new exports rose at the quickest pace since December 2013. However, the negative side of the falling Yen/Dollar rate was still felt by manufacturers, as purchasing costs continued to rise sharply.’
As trading progressed on Monday, the Yen failed to recoup earlier losses against the ‘Greenback’ even after the US published a below-forecast ISM manufacturing index.
Over the next few days a number of Japanese reports have the potential to initiate Yen fluctuations, with the most notable being the Markit/JMMA Composite and Services PMI’s and the Coincident/Leading Indexes.
The US Dollar to Japanese Yen exchange rate is currently trading in the region of 119.7100
The Pound Sterling to Japanese Yen exchange rate was trending in the region of 184.3200, down slightly on the day’s opening level.