Over the last five days the US Dollar to Japanese Yen exchange rate has moved from a low of 122.8730 to a high of 125.0700 as the ‘Greenback’ responded to a run of positive US data by adopting a bullish relationship with the majority of its currency counterparts.
In the wake of the release of encouraging US manufacturing data, the USD/JPY exchange rate briefly breached the key 125 Yen per Dollar level – marking the Yen’s softest rate since 2002. The move in the pairing saw currency strategist Sean Callow comment; ‘We’ll probably need better data out of the US to really drive substantial gains in Dollar/Yen. With prospects of stronger US growth, you can’t dismiss 130 as a target.’
However, on Tuesday the Yen was able to recoup some of its recent losses against the US Dollar as dovish comments from a Federal Reserve official and disappointing US data triggered a ‘Greenback’ selloff. The USD plummeted by more than 1% against the Euro and Swiss Franc and lost over 0.5% against the Pound, Canadian Dollar and Japanese Yen during the European session.
While US Factory Orders were shown to have fallen by more-than-anticipated in April, it was the comments from Federal Reserve Governor Lael Brainard which did the damage. Brainard asserted; ‘There is value to watchful waiting while additional data help clarify the economy’s underlying momentum. If continued labour market strengthening is confirmed and inflation readings continue to improve, liftoff could come before the end of the year. [However] It would be difficult, based on the data available today, to dismiss the possibility of a more significant drag on the economy than anticipated from foreign crosscurrents and the negative effects of the oil price decline, along with a more cautious US consumer.’
US Factory Orders had been expected to dip by -0.1% on the month in April following the 2.2% gain recorded in March. However, orders actually slumped -0.4% on a month-on-month basis.
There are several other high-profile US ecostats scheduled for publication before the weekend, including the nation’s ADP Employment Change, Trade Balance and ISM Non-Manufacturing Composite numbers. Friday’s US Non-Farm Payrolls report is also likely to have a profound impact on Federal Reserve interest rate hike speculation.
Reports which support the case in favour of a 2015 adjustment will bolster the US Dollar to the detriment of the Yen, but any data which pushes back rate hike expectations could help the Japanese currency advance. Japanese developments which may impact Yen trading this week include the nation’s Markit Services PMI (forecast to decline slightly from 51.2 to 51.02) and a speech to be given by Bank of Japan (BoJ) Governor Haruhiko Kuroda.