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Talking Points:

  • The Japanese Yen slipped against the greenback following robust export numbers from its home economy
  • Japanese trade is often held up as a world economic health check and on this showing the patient looks healthy enough
  • However USD/JPY remains firmly in a broad downtrend

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The Japanese Yen was a little weaker against the US Dollar Monday following news of a smaller-than- expected trade gap in Japan.

January’s trade balance came in at a deficit of JPY943.3 billion (US$8.9 billion), which was below the JPY1,010.2 billion gap expected. Exports rose by 12.3%, well above both the expected 9.4% gain and ahead of December’s 9.3% rise. Imports were more subdued but still nudged past expectations. They rose 7.9% when 7.8% had been the average forecast.

As a global-trade bellwether the numbers speak to still-robust demand for Japan’s exports and that’s probably what saw the US Dollar pick up a little following their release. The Japanese Yen is not usually in demand when investors scent better-yielding opportunities than Japan affords.

That said weekend reports that the US is considering tariffs on imported metals - notably steel - and that China has threatened to retaliate against any such action, will probably keep the threat of a more protectionist US hovering over all trade-related market action.

Japanese Yen Slips, Strong Exports Suggest Healthy World Demand

However, the Japanese Yen has benefitted as much as any major from the current bout of broader US Dollar weakness, which remains the foreign-exchange market’s overriding theme.

To some extent the greenback’s lack of vigor is surprising given rising US Treasury yields and the widely held belief that the Federal Reserve will raise interest rates further next month. This week will bring the minutes of the Fed’s last monetary conclave and if they show the central bank in hawkish mood then the Dollar could see a revival.

But for now the USD/JPY trend remains firmly lower with last week’s swoon invigorating a broad downtrend which has been in place since January 8.

Japanese Yen Slips, Strong Exports Suggest Healthy World Demand

On its daily chart the pair may be stuck around current levels until Wednesday when those minutes will be released.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch.