Both the Pound Sterling to Japanese Yen (GBP/JPY) and US Dollar to Japanese Yen (USD/JPY) exchange rates were trending in a narrow range following the release of minutes from the Bank of Japan’s (BOJ) latest policy meeting.
The minutes highlighted concerns over the central bank’s current bond buying programme, stating; ‘A few members [of the policy committee] pressed the view that, in pursuing QQE, it was important to carefully assess the mechanism of price formation in the JGB (Japanese government bond) market as well as examine and compare the positive effects and side effects of JGB purchases.’
However, while the Yen initially declined in response to the minutes, the safe-haven currency recovered losses as China’s below-forecast trade stats seriously reduced demand for higher-risk and emerging-market currencies.
The nation’s trade surplus narrowed by considerably more than expected due to a sharp (and unforeseen) tumble in exports.
The data saw some industry experts speculate that a slowdown in China, the world’s largest economy, may prompt the People’s Bank of China (PBOC) to introduce additional stimulus – an action which would reduce demand for the Yen in the medium term.
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate was trading in the region of 176.2100.
The US Dollar to Japanese Yen (USD/JPY) exchange rate was trending around the 120.3000 level.
Overnight Yen losses were also limited as Japan’s Machine Orders report printed at 5.9% in February, year-on-year, up from an annual figure of 1.9% in January and beating forecasts for a 4.3% gain. On a month-on-month basis, Machine Orders came in at -0.4%, bettering the -2.2% reading expected.
In the days ahead the Japanese reports to focus on include the nation’s final Industrial Production figures, foreign bond buying data and Japan’s Consumer Confidence Index.
Of course, the direction taken by the Japanese Yen will also depend on how well US reports do.
Should the week’s US retail sales and inflation figures support the case for a summer interest rate increase from the Federal Reserve, the Yen is likely to dip against the US Dollar but gain on its higher-risk rivals.
Conversely, if US retail sales fail to rebound by the amount anticipated, or if US inflation decelerates rather than accelerates and pushes back Fed rate hike bets, the Yen could tumble against peers like the Australian and New Zealand Dollars.
Investors with an interest in the GBP/JPY exchange rate will be focusing on the UK’s Consumer Price Index and employment figures.