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Japanese Yen Mixed amid Signs of Economic Slowdown

The Japanese yen was mixed today despite the relatively negative sentiment amid investors. Usually, the yen rallied amid risk aversion due to its status as a safe haven. But today, the currency was struggling to rise. Some analysts explained that by the rally of the stock market. Domestic economic indicators were not favorable to the currency of Japan either. European stocks rallied, with all major indices logging gains. That alleviated […]

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The Japanese yen was mixed today despite the relatively negative sentiment amid investors. Usually, the yen rallied amid risk aversion due to its status as a safe haven. But today, the currency was struggling to rise. Some analysts explained that by the rally of the stock market. Domestic economic indicators were not favorable to the currency of Japan either.

European stocks rallied, with all major indices logging gains. That alleviated investors’ concerns a bit, putting pressure on the yen. But US trading started will all US stock indices in the red, helping the currency to regain some of its strength. The surge of new coronavirus cases in various parts of the world made investors nervous, potentially attracting them to the safety of the yen. The issue for the Japanese currency is the fact the traders seemingly prefer the US dollar as a refuge, while the yen fails to grab their attention.

Japanese macroeconomic data released on Wednesday was poor, with both manufacturing and services sectors remaining in decline. The headline au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index rose marginally from 47.2 in August to 47.3 in September but remained firmly below the neutral 50.0 level. The au Jibun Bank Flash Japan Business Activity Index rose from 45.0 to 45.6 but also remained far below the level of no growth. Bernard Aw, Principal Economist at IHS Markit, commented on the results:

Flash PMI survey data indicated a further decline in Japanese private sector output during September, setting the scene for further economic weakness in the third quarter.

Not everything was bad, though, as he continued:

That said, the picture of the economy remained much improved when compared to the height of the pandemic during the second quarter. The survey also revealed some positive signs. Firstly, employment moved closer to stabilisation, with only a marginal drop in workforce numbers that was the weakest in the current sequence of job shedding. Secondly, business sentiment improved to the strongest since the start of the year, with manufacturing firms particularly optimistic about the year-ahead outlook.

USD/JPY jumped from 104.93 to 105.46 as of 19:29 GMT today. EUR/JPY was at 122.92, little changed from the opening level of 122.84. GBP/JPY advanced from 133.56 to 134.11.


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