Speculation that President Barack Obama is preparing to endorse Janet Yellen’s nomination for the position of Chairman of the Federal Reserve caused the Yen to broadly soften during Australasian trading.
As Yellen has made no secret of her pro-stimulus stance, if she takes on the top position in the central bank the odds of the Fed tapering stimulus will decrease significantly. Consequently, economists are now warning that if US easing is maintained for a longer period the Yen could rally and put the Japanese economy under pressure.
The Japanese Yen exchange rate was in the region of 155.5990 Yen to one British Pound as of 11:00 am GMT
According to one of Japanese Prime Minister Shinzo Abe’s advisors, the Bank of Japan may need to take action to safeguard Japan’s economic recovery if Yellen’s fiscal approach wears on the nation’s currency, exporters and battle against deflation.
Koichi Hamada stated; ‘Yellen probably won’t seek an exit from an accommodative policy immediately. The BOJ doesn’t have to promise anything now, but I want them to be ready in case damage to Japan’s economy becomes clear.’
The GBP/JPY exchange rate hit a low of 154.5060
After news of Yellen’s expected nomination broke the Yen declined against all of its currency rivals as investors flocked to higher-yielding assets, notably sliding by 0.6 per cent against the US Dollar and 0.5 per cent against the Euro.
The Asian asset also posted a drop against the Pound.
In response to the Yen’s movement currency strategist Peter Dragicevich stated; ‘The Yellen news did put a bit more positive risk sentiment in the market and you saw the Yen weaken on the crosses. The view is that Yellen is obviously quite dovish and markets could take that as a sign that policy will remain accommodative for a more extended period of time.’
However, the Yen enjoyed a rebound against Sterling as the European session progressed and the Pound broadly softened in reaction to surprisingly negative UK data releases.
While the UK’s trade deficit widened unexpectedly, industrial/manufacturing production defied expectations by posting month-on-month drops of 1.1 per cent and 1.2 per cent respectively.
The GBP/JPY pairing struggled after the data was published, but Sterling could rebound if today’s NIESR GDP figure for September is strong.
Overnight additional GBP/JPY movement could be triggered by Japanese machine orders, foreign bonds and bank lending data.
News from the US and tomorrow’s Bank of England rate decision will also be of interest.
Current Japanese Yen (JPY) Exchange Rates:
< Down > Up
The US Dollar/Japanese Yen Exchange Rate is currently in the region of: 97.3800 >
The Pound Sterling/Japanese Yen Exchange Rate is currently in the region of: 158.4000 >
The Euro/Japanese Yen Exchange Rate is currently in the region of: 131.6620 >
The New Zealand Dollar/Japanese Yen Exchange Rate is currently in the region of: 80.8976 >
The Australian Dollar/Japanese Yen Exchange Rate is currently in the region of: 92.0811 >
(Correct as of 11:00 GMT)
Comments are closed.