Yen Falls After Rise in PMI, Looks to CPI and Risk Sentiment


TALKING POINTS: YEN, ASIA PACIFIC EQUITIES, BOJ, CPI, NAFTA

  • Yen fell after slight uptick in PMI but follow-through unlikely
  • Bank of Japan unlikely to consider a near-term policy change
  • Yen eyes local inflation data and market risk trends next

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The Japanese Yen slightly fell against the US Dollar as local economic data crossed the wires early into Thursday’s Asia Pacific trading session. August’s preliminary Nikkei manufacturing PMI data clocked in at 52.5, a slight uptick from the prior 52.3, indicating that manufacturing growth has quickened. Asia Pacific equities reacted positively to the index’s expansion, as the Nikkei 225 and Hang Seng both gained. However, USD/JPY’s cautious rally may lack follow-through as the currency pair has remained in a downtrend channel since July 20th.

USD/JPY 5-Minute Chart

Yen Falls After Rise in PMI, Looks to CPI and Risk Sentiment

USD/JPY Daily Chart

Yen Falls After Rise in PMI, Looks to CPI and Risk Sentiment

Regardless, the slight acceleration in economic activity is unlikely to influence the Bank of Japan’s monetary policy. Japanese inflation has consistently remained under the “sustainable two-percent” target that the central bank has set, and the monetary policy authority is currently engaged in a large-scale quantitative and qualitative easing program with added yield curve control.

Looking ahead, the risk-averse currency may pare its losses following the release of July’s year-over-year CPI data, which is expected to rise to 1.0% from May’s 0.7%. The unit also faces the release of local retail trade and employment data next week. Furthermore, the Yen will also closely eye risk trends, as markets’ recent rally off of a proposed NAFTA deal between the United States and Mexico could impact the currency’s next moves.

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— Written by Megha Torpunuri, DailyFX Research Team



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