Before the release of a run of influential US reports, the Yen softened for a fourth day against its US counterpart – making the current uptrend in the USD/JPY pairing the longest for a month. There was no Japanese data to counter the Yen’s losses overnight, and reduced demand for safe-haven assets pushed the Asian currency lower. In the opinion of currency strategist Marc Chandler; ‘Maybe the market is preparing itself for the end of year – no one is incentivised to fight the trend now. The Dollar has bounced from 115.50 Yen last week back to 120. Hard to keep the good buck down.’
After the US released stronger than-anticipated growth data for the third quarter, the US Dollar rallied across the board and the USD/JPY exchange rate advanced to a high of 120.7400. The US economy was believed to have expanded by 4.3% in the third quarter of the year, so the actual expansion of 5.0% was an unexpected surprise. With the rapid pace of growth adding to the argument in favour of the Federal Reserve increasing interest rates as early as April next year, the US Dollar was buoyed by the back-ward looking ecostat. The growth report, and the US Dollar’s subsequent gains against rivals like the Yen, Pound and Euro, saw analyst Mike Jakeman observe; ‘There is a positive feedback loop going on at the moment. Job creation is running at the strongest rate for 15 years. More people in work means more income, which means more private spending, which means more business investment, which means more hiring.’
US Dollar gains were a little tempered by a poor US Durable Goods Orders figure and an unforeseen decline in domestic New Home Sales. The durable goods orders report was a real shocker, with the -0.7% drop defying expectations for a 3.0% gain in November. However, the University of Michigan Confidence index for December was negatively revised by less-than-expected. The sentiment index had been forecast to recede from the initially estimated 93.8 to 93.5 in December. However, the figure actually came in at 93.6. Overnight additional USD/JPY exchange rate movement could occur as a result of Japan’s small business confidence figure. The measure registered at 47.7 in November. Investors will also be looking ahead to tomorrow and the publication of the US initial jobless/continuing claims figures and the MBA Mortgage applications data.