The Japanese Yen (JPY) remains under pressure against the US Dollar (USD), recently around 152.80. This week is perhaps the biggest turning point in the currency market. The JPY has gained for six straight days vs the USD! Yet for all this new strength, the Yen is still down -0.12% on the percentage change against the USD, signaling that the battle is far from over.
A cocktail of economic indicators have combined to create the perfect storm for the current state of the JPY. Indeed, the most recent data show that, even as domestic inflation is firming, it’s below goal. In particular, Japan’s inflation rate surged by 3.0% year-on-year, missing estimates of 3.1%. Furthermore, the headline and core Consumer Price Index (CPI) rose to 2.9% in September, up from 2.7% in August. These numbers both point to persistent inflationary pressures. These interventions have not been sufficient enough to materially appreciate the Yen against advanced economy currencies, particularly the USD.
Surprisingly compared to how it was performing against the USD, on a cross currency basis, the JPY actually held up well. Perhaps most notably, it came out on top as the strongest currency on a percentage basis against the CAD (0.12% change). Other Currency Strength In currency strength, the JPY experienced slight increases against the British Pound (GBP), gaining 0.08%. It appreciated against the Australian Dollar (AUD), printing a gain of 0.06%. In addition, it appreciated consistently against the New Zealand Dollar (NZD) at 0.06%.
Yet, the Yen’s sake has been a mixed fortune. It has seen horrific declines on both the Euro (EUR) and most recently the Swiss Franc (CHF). These percentage changes are equivalent to -0.21% and -0.12% in each case, respectively. This points to the fact that despite strong areas, overall trends are still pushing down the currency’s value.
Market analysts are awash in predictions based on these developments and others as they play out in real time. Yen weakness has proven remarkably persistent for a number of reasons. Global economic conditions as well as market sentiments towards the Japanese economy feed directly into this trend. The recent softening of inflation data has led investors to question the potential for further monetary tightening by the Bank of Japan (BoJ).
In reaction to these dynamics, traders at all levels are changing their game plans. Many are weighing potential shifts in interest rates and economic indicators that could influence currency values in the coming weeks. As such, volatility in the JPY is sure to persist, as market participants adjust to the new facts.