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US Dollar Continues Attempts to Recover from May?s 18-Month Low Against Yen

Published: 17 May at 3 PM Tags: Dollar Exchange Rate, Australian Dollar Exchange Rate, Currency Exchange, Forex, Euro Crisis, Yen Exchange Rate, UK, Exchange Rates,

The US Dollar to Japanese Yen (USD/JPY) exchange rate briefly strengthened on Tuesday’s session to hit its highest point in May on underwhelming Japanese data, but mixed US news including weekly earnings held the ‘Greenback’ down.

US Dollar (USD) Struggles to Advance on Unsurprising CPI, Disappointing Wage Data

Despite USD/JPY reaching 109.6410 on Tuesday, its highest point since the plummet on the 28th of April, the ‘Ninja’ pair was unable to sustain a considerable gain during Tuesday’s session as mixed US data dragged the US Dollar closer towards opening levels. At the time of writing, USD/JPY trended narrowly in the region of 109.0200.

The US Dollar was weaker in many pairings on Tuesday dented chances of a rally, with the Federal Reserve’s recent dovishness making investors extra sensitive to any disappointing US data.

Disappointing data included Monday’s Empire manufacturing which shifted from 9.56 to a surprising contraction of -9.02 in May, as well as the NABH’s latest housing market report which showed a slowing from 58 to 57.3.

Tuesday’s session included underwhelming building permit and weekly earnings reports. While building permits escaped March’s contraction of -8.6%, they let down expectations of 5.5% by only improving to 3.6%. Average weekly earnings also slowed considerably from 1.1% to 0.2%.

Not all data was poor however, as US Consumer Price Index (CPI) printed largely as expected with month-on-month scored even improving past the 0.3% prediction, from 0.1% to 0.4%. Industrial production also impressed investors by improving from -0.9%, well past the projected 0.3% to 0.7%.

Japanese Yen (JPY) Held Back by Possibility of Forex Intervention

Various factors held down the Japanese Yen on Tuesday and made it difficult for the currency to resist the USD/JPY exchange rate’s movements.

According to Reuters, reasons for the Yen’s weakness include a surprising increase in risk-sentiment. Appeal for risky currencies shot up after the Reserve Bank of Australia’s (RBA) latest meeting minutes revealed a hesitation to cut rates, harming ‘safe-haven’ currencies like the Yen.

The Yen also felt ongoing pressure over the last week after Japanese Finance Minister Taro Aso stated that the Japanese government would be willing to intervene in the foreign exchange market in order to prevent the currency from becoming overvalued. This concern was brought on by the Yen’s 18-month high against the US Dollar on the 3rd of May.

Japanese data has been mixed and unable to boost the Yen’s defences. Japanese machine tool orders worsened from -21.2% to -26.4% year-on-year, while domestic corporate goods prices printed contractions in both monthly and yearly prints.
On the other hand, Tuesday’s decent industrial production score improving from 3.6% to 3.8% month-on-month may have helped the Yen recover against the briefly bullish ‘Greenback’.

US Dollar to Japanese Yen (USD/JPY) Exchange Rate Forecast: Japanese GDP Due Wednesday

The fluctuating ‘Ninja’ exchange rate could see a more definitive direction during Wednesday’s session, with investors highly anticipating Wednesday morning’s preliminary Japanese Gross Domestic Product (GDP) report.

GDP is currently forecast to escape negative territory in all major prints, from -0.3% to 0.1% quarter-on-quarter, and from -1.1% to 0.3% in its annualised score.

If scores escape contraction or possibly print higher than expected, the Japanese Yen is likely to push back against the US Dollar. However, the Yen is unlikely to gain considerably as the intervention warnings from Finance Minister Aso continue to apply pressure.

US Dollar investors, on the other hand, are likely to focus all their attention on the Federal Reserve’s incoming Federal Open Market Committee (FOMC) minutes release on Wednesday evening.

As the Fed’s tone has recently set the overall attitude to the ‘Greenback’, any indication of a hawkish or dovish tone could send the ‘Buck’ in an inspired direction. US MBA mortgage applications and a crude oil inventory update are also due for release on Wednesday.

The US Dollar to Japanese Yen (USD/JPY) exchange rate currently trends in the region of 109.0200, while the Japanese Yen to US Dollar (JPY/USD) exchange rate trades at around 0.0092.