Japanese yen could contain the fall as the economy contracts less than projected in the first quarter.
The Japanese yen (JPY) fell for the second consecutive trading day on Monday. The USDJPY pair received support as the US Dollar (USD) recovered strength following better-than-expected US employment statistics announced on Friday.
Mixed Japanese data may limit the JPY’s downside.
Japan reported mixed statistics on Monday, which could limit the Japanese Yen’s downside. Gross Domestic Product Annualized revealed that Japan’s GDP contracted less than projected in the first quarter. Meanwhile, GDP (QoQ) contracted in Q1 matches the flash data.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is rising due to increased US Treasury yields. A solid US jobs data is expected to reinforce the Federal Reserve’s hawkish attitude. According to the CME FedWatch Tool, the chances of a Fed rate cut of at least 25 basis points in September have dropped to approximately 48.0%, down from 54.8% a week ago.
Daily Market Movers: Japanese Yen falls following strong US labor data.
Japan’s annualized GDP fell by 1.8% in the first quarter, compared to a previous loss of 2.0%. The data marginally beat market expectations for a 1.9% decline. Meanwhile, Japan’s GDP (qoq) shrank by 0.5%, consistent with the flash figures.
Japan’s 10-year government bond rate rises above 1.01% ahead of the Bank of Japan (BoJ) policy meeting on Friday. The central bank is anticipated to maintain existing interest rates, while traders are keeping a careful eye on any potential reductions in the bank’s monthly bond purchases.
In its research, Rabobank projected that the Federal Reserve may decrease interest rates in September and December, more likely due to a weakening economy than progress on inflation. This is because they believe the US economy is approaching a stagflationary period, with persistent inflation and an economic slowdown that will likely result in a moderate recession later this year.
According to the US Bureau of Labour Statistics (BLS) On Friday, May’s US Nonfarm Payrolls (NFP) grew by 272,000, up from 165,000 in April. Wage inflation, as measured by average hourly earnings, increased 4.1% year on year in May, up from 4.0% (raised from 3.9%) in April, exceeding the market consensus of 3.9%.
Shunichi Suzuki, the Japanese Finance Minister, announced on Friday that he will intervene in cases of extreme currency volatility and analyze the success of his actions. Suzuki stressed the need of maintaining market faith in government finances, stating that there is no money limit for FX intervention, according to Reuters.
Japan’s 10-year government bond rate rises above 1.01% ahead of the BoJ’s policy meeting on Friday.
The data marginally beat market expectations for a 1.9% decline. Meanwhile, Japan’s GDP (qoq) shrank by 0.5%, consistent with the flash figures.
Japan’s 10-year government bond rate rises above 1.01% ahead of the Bank of Japan (BoJ) policy meeting on Friday.
The Japanese Foreign Reserves published by the Ministry of Finance in May fell sharply to $1,231 billion from $1,279 billion. This represents the lowest level since February 2023, as the To safeguard the Japanese yen, the government carried out foreign exchange intervention operations.
According to Reuters, when speaking before parliament on Thursday, Bank of Japan (BoJ) Governor Kazuo Ueda noted that inflation expectations are progressively growing but have not yet reached 2%. Ueda stated, “We are still monitoring market trends following the March ruling. As we transition from our huge monetary stimulus, it is appropriate to limit bond purchases.”
