Japanese yen climbs back above ¥100/dollar

epa05492172 A Tokyo money trader works during the morning trading session under a display showing the exchange rate between the US dollar and the Japanese yen in Tokyo, Japan, 17 August 2016. EPA/CHRISTOPHER JUE©EPA

Thursday 05:30 BST. The Japanese yen climbed back above the ¥‎100 per dollar mark as the US currency struggled for traction in the wake of minutes from the Federal Reserve’s July meeting that offered few hints as to the timing of the next US interest rate rise.

The stronger yen, though, heightened the pressure on the Bank of Japan to be more aggressive in easing monetary policy — especially after data showing Japanese imports and exports in July suffered their biggest monthly fall since 2009.

The yen was up 0.2 per cent at ¥‎100.1 per dollar and on track for a fifth straight day of gains, which would mark the longest win streak in two months. It rose as far as ¥‎99.65, moving back toward the roughly two-and-a-half-year high of ¥‎99.02 hit on June 24 in the wake of the UK’s vote to leave the EU.

Japanese exporters were weighing on the stock markets, with the broad Topix down 1 per cent and the Nikkei 225 down 0.9 per cent.

Australia’s S&P/ASX 200 was off one-third of a per cent while Hong Kong’s Hang Seng rose 1.6 per cent, led by a strong gain in index heavyweight Tencent after the company delivered a record profit in the second quarter. On the mainland, China’s Shanghai Composite was up 0.4 per cent while the tech-focused Shenzhen Composite edged up 0.3 per cent.

Investors across the region were homing in on the minutes from the Fed’s most recent policy meeting, although the closely contested debate about when to tighten monetary policy left markets unclear as to timing of the next increase.

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“I don’t think this tells us much about the September meeting, which is, as ever, data- and market-dependant, but it does tell us that the most we’ll get is a very slow and cautious tightening path,” said Kit Juckes at Société Générale. “I’m still sure that the [Fed] would like the market to price a bit more in, but only because when they finally act, they don’t want the dollar to go up too much (if at all) and risk sentiment to suffer too much (if at all).”

On Thursday, the probability of a 25 basis point rise at the Fed’s September meeting was unchanged at 22 per cent, while the chance of a rate rise in December dipped to 48.5 per cent from 51 per cent the day before, according to market pricing tracked by Bloomberg.

Gold, which is sensitive to interest rate expectations, was up 0.3 per cent at $ 1,352.98 an ounce, eyeing a fourth day of gains.

The US currency endured some choppy trading on Wednesday following the minutes, before closing the session 0.1 per cent lower. In Asia the dollar index was down another 0.1 per cent at 94.585, but the yen remained firmly in the spotlight as it held above the psychological ‎‎¥100 mark.

While a weak dollar is a key reason for the stronger yen, Julian Jessop at Capital Economics pointed out that the Japanese currency has appreciated by more than twice as much as any other major since late July.

“The main explanation for the continued appreciation of the yen is that, having disappointed the markets by leaving monetary policy on hold at its late-July meeting, the Bank of Japan is now thought increasingly unlikely to ease any further. This might be because the onus has shifted towards fiscal stimulus, or simply because the BoJ has run out of options,” he said.

Data on Thursday showed Japanese trade took a knock in July, with exports falling 14 per cent year-on-year and imports tumbling 24.7 per cent, their steepest declines since October 2009 and slightly worse than economists’ already dour forecasts.

The big mover in Asian currency markets was the Australian dollar, up 0.5 per cent at US$ 0.7696 after data showing the unemployment rate fell a tenth of a percentage point to 5.7 per cent in July. The economy added a better-than-expected net 26,200 jobs, with strong gains to part-time positions (owing to the recent federal election) offsetting a large drop in full-time jobs.

“We still assume that the part-time bump is temporary, and we pencil in a decent correction for the August report,” said Annette Beacher at TD Securities. “Solid employment growth is just not sparking wages growth as per prior cycles in all industries, not just services,” she added.

Oil prices were weaker in Asia with Brent crude, the international benchmark, down 0.4 per cent at $ 49.65 a barrel, and West Texas Intermediate down 0.1 per cent at $ 46.75.

Prices have been buoyed in recent days by hopes major producers might soon agree to a production freeze, but were buffeted on Wednesday by news of a drop in US crude inventories and reports Saudi Arabia might in fact raise output to record levels.

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