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Japanese Yen Rallies as 1Q GDP Beats, Risk-Aversion Takes Hold

Japanese Yen Rallies as 1Q GDP Beats, Risk-Aversion Takes Hold

Christopher Vecchio, CFA, Senior Strategist

The Japanese Yen has been one of the worst performing majors since Friday, but with no new stimulus coming from the Federal Reserve, European Central Bank, or the Bank of England in the short-term, risk-aversion has taken hold. Aided by a strong first quarter GDP figure, the Yen is the early top performer.

THE TAKEAWAY: Japanese 1Q GDP > 4.7% Annualized versus 4.5% Expected > JPY Bullish

Japanese growth continues to rebound, but any further gains are very much in question. After growing by 4.1 percent in the fourth quarter of 2011, Japanese first quarter growth showed further improvement, coming in at an annualized rate of 4.7 percent. The reading was stronger than the expected print at 4.5 percent, according to a Bloomberg News survey.

Undoubtedly, the broad based Japanese Yen weakness in the first quarter aided stronger growth, as the Yen depreciated by: 13.50 percent against the New Zealand Dollar; 9.20 percent against the Australian Dollar; and by 7.75 percent against the US Dollar (the US is Japan’s second largest trading partner).

AUDJPY 1-minute Chart: June 7, 2012

Japanese_Yen_Rallies_as_1Q_GDP_Beats_Risk-Aversion_Takes_Hold_body_Picture_1.png, Japanese Yen Rallies as 1Q GDP Beats, Risk-Aversion Takes Hold

Charts Created using Marketscope – Prepared by Christopher Vecchio

Following the release, the USDJPY skipped higher from 79.69 to 79.75, but with risk-aversion in full swing, the pair quickly traded back towards 79.64 [UPDATE 01:36 GMT: the USDJPY was trading at 79.44 at the time this report was updated]. The big mover, however, was the AUDJPY, which like the USDJPY, initially jumped higher, but fell sharply thereafter. The AUDJPY jumped from 78.99 up to 79.08, but was trading back at 78.62 at the time this report was written [UPDATE 01:36 GMT: the AUDJPY was trading at 78.27 at the time this report was updated].

UPDATE: Risk-aversion has been the theme of early trade on Friday, with commodities leading the slide as market participants digest the ‘disappointment’ of no QE3 announcement by Chairman Ben Bernanke. Furthermore, the rate cut by the People’s Bank of China – their first since 2008 (and pre-crisis) – raises necessary concerns about the state of one of the world’s most important economies. Crude Oil and Gold have been leading the decline since the Bernanke testimony this morning, and they should be monitored closely throughout Friday’s trade.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.