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Yen Weakens Again; Machine Orders Remain Soft

Yen Weakens Again; Machine Orders Remain Soft

David Cottle, Analyst

Talking Points:

  • Japanese machine tool orders came in weak, again, but much less so than the previous month
  • The print didn’t look great for manufacturing capex in Asia’s number-two economy
  • USD/JPY continued to rise, but it’s hard to pin that on the data

The Yen weakened further against the US Dollar on Monday, with its focus perhaps elsewhere than local data despite an underwhelming showing for Japanese machine tool orders.

Orders are a reasonable proxy for manufacturing sector capital spending ahead. They fell 5.6% on-year in November. At face value this was an unambiguously weak piece of data, but the devil in the details revealed it to be a much better print than last month’s, when orders slipped by a whopping 8.9%.

Still the Yen fell after the numbers, with USD/JPY up to 115.65, making new ten-month highs. However, the greenback has been looking like a currency which wants to rise all morning as markets focus on this week’s interest rate decision from the US Federal Reserve. A modest increase in the Fed Funds target rate is expected, and investors are keen to gauge from the Fed’s tone how many more there might be.

It’s been a busy morning for Japanese data, with consensus-smashing prints from both corporate goods prices and machine orders, both of which failed to support the currency.

The picture was a bit less rosy for the tertiary industry sector. Activity there rose by 0.2% on the month in November. That was slightly less than the 0.3% markets had been looking for, but rather better than October’s 0.3% fall (revised down this month from 0.1%).

The tertiary industry index is released by METI and gauges changes in output, primarily in those parts of the service sector which cater to domestic demand. Think catering, wholesalers, real estate and so on.

The Yen has been under pressure once again this session, although it’s not clear that local data have had a lot to do with the overall trading picture. The perceived global reflationary consequences of Donald Trump’s US Presidency have seen gains for both Japanese bond yields and the Nikkei through Monday.

USD/JPY: A pair which wants to go higher

Chart compiled using TradingView.

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--- Written by David Cottle, DailyFX Research

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