During Australasian trading the Yen edged lower against almost all of its major currency peers, sliding against the Pound and posting its first decline against the US Dollar for several days.
While struggling Asian stocks supported the safe-haven currency yesterday, the Yen stumbled as the Bank of Japan gathered for its first two-day policy meeting of 2014 and Asian stocks climbed.
The central bank is expected to discuss the possibility of expanding stimulus from the already unprecedented levels introduced last April.
The Yen was also feeling the pressure as Japan’s Economy Minister Akira Amari warned that the risks associated with deflation continue to loom over the nation.
Speaking to reporters, Amari stated; ‘As of today, we can say we have escaped deflation. However, the problem is there is no guarantee that we will not return to deflation. So we are not in deflation, but there is a risk we could return to a deflationary environment.’
Amari’s comments prompted this response from foreign exchange strategist Jeremy Stretch; ‘Amari’s warning that Japan is escaping deflation but that it could return suggests that the Bank of Japan may keep its foot on a monetary pedal. That puts pressure on the Yen.’
The BOJ is expected to introduce further stimulus in order to counteract the impact of a planned increase in sales tax.
Meanwhile, the Pound was able to consolidate gains against the Yen as investors digested yesterday’s positive UK house price report and forecast an improvement in a measure of UK business confidence.
Today’s CBI Business Optimism gauge is expected to have climbed from 24 in December to 25 in January.
Overnight significant GBP/JPY movement could occur in response to the BOJ monetary policy statement, but with UK employment data scheduled for publication on Wednesday further movement in the pairing is likely.
Japanese Yen (JPY) Exchange Rates
|Pound Sterling||Japanese Yen||171.8860|
|US Dollar||Japanese Yen||104.6300|
|Australian Dollar||Japanese Yen||91.8509|
|New Zealand Dollar||Japanese Yen||86.9623|
|Canadian Dollar||Japanese Yen||95.1683|