With Turkish and Chinese policy makers attempting to calm financial markets following a notable selloff in emerging market currencies, a three-day decline in Asian equities was brought to an end.
The Yen consequently lost its draw as a safe-haven asset and declined against peers like the Pound and US Dollar.
Sterling extended gains against the Yen during the European session as UK GDP figures confirmed that the British economy expanded by 0.7 per cent in the fourth quarter, rounding off the best year of growth since global financial markets were decimated in 2007.
Excepting construction, every sector of the UK economy enjoyed growth, prompting this response from economic advisor Joe Grice; ‘The economy does seem to be improving more consistently. Today’s estimate suggests over four fifths of the fall in GDP since the recession has been recovered.’
The Yen was little affected by domestic reports showing a larger-than-expected advance in Japan’s corporate service price and a modest gain in the nation’s small business confidence.
The measure of small business sentiment edged up from 51.1 in December to 51.3 in January.
The USD/JPY exchange rate also pushed higher as the ‘Greenback’ rose before the Federal Open Market Committee’s two-day policy meeting began.
In the opinion of one Tokyo-based industry expert; ‘The risk-off sentiment in the market is waning. The market expects the Fed to taper asset purchases by 10 billion Dollars. That’s providing support for the Dollar.’
However, as yesterday’s US new home sales report demonstrates, US data has been a bit patchy of late and December’s disappointing non-farm payrolls figure could dissuade the FOMC from tapering by such a significant amount.
As a reduction in easing has largely been priced in a surprise move on the part of the FOMC could see the US Dollar plummet and the Yen recover ground against its North American rival.
Furthermore, a stream of influential economic reports for Japan (including retail trade figures) are scheduled for release tomorrow and could affect the Yen’s relationship with peers like the Pound.
Japanese Yen (JPY) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,Japanese Yen,170.9910 ,
Euro,,Japanese Yen,140.7550 ,
US Dollar,,Japanese Yen,102.9200,
Australian Dollar,,Japanese Yen,90.6955 ,
New Zealand Dollar,,Japanese Yen,85.3338 ,
Canadian Dollar,,Japanese Yen,92.7999 ,
[/table]
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