jpy news

Yen Loses 118.50

Tuesday, 26 December 2006 06:34:40 GMT  |  Terri Belkas, Currency Analyst

After struggling to hold below resistance at 118.50, Yen ended last week off on a sour note as USD/JPY jumped as high as 118.97 when it became crystal clear that the Bank of Japan has absolutely no intention of hiking rates before seeing solid signs of inflation and consumption growth.

The BOJ Monetary Policy committee completed its December meeting by maintaining a steady hand and leaving the headline assessment of current conditions unchanged, saying “Japan's economy is expanding moderately.” The central bank did not change the  assessment of the economic outlook either, noting that “Japan's economy is expected to continue expanding moderately.” Governor Fukui conceded in a post meeting press conference that Japanese consumption remained weak, which in turn prevented him from making any prognostications regarding the timing of any future rate hikes. Meanwhile, the all-industry activity index rose slightly more than anticipated to 1.7%, which was inline with the previous week’s strong tertiary index reading. The data only reiterates the strength of manufacturers and businesses in general. However, until these companies start to raise payrolls for employees, consumer spending has little help of picking up.

Japan has by far the greatest amount of data on the agenda for this week, but given the low amount of volatility expected, the economic releases may not resonate much through the markets. Whether this is good or bad for the yen remains to be seen, as weak CPI released earlier today along with less optimistic business sentiment certainly does not bode well for the national currency. However, should we see a rise in retail trade and labor cash earnings, the negative effects of tepid CPI may be negated, as USD/JPY bears will bet that signs of improving consumption will lead to a more hawkish BOJ.

Resources

• free demo account
• forex courses
• open an account
• forex stream
• free webinars