The Japanese Yen has strengthened for a third-day against the US Dollar after Chinese GDP grew at a weaker pace than economists had predicted spurring on demand for safer currencies and led to sharp declines for commodity based currencies.
The Yen rose against all but one of its peers after China revealed that it’s Gross domestic product expanded by 7.7% last quarter from the previous year. Economists had been expected the figure to rise to 8%.
“The weak China data has spurred risk-off sentiment and Yen buying, people with Yen short positions probably won’t be adding to them now and may be taking profits of the G-20 meeting.” Said Marito Ueda, senior managing director at FX Prime Corp based in Tokyo.
The Yen was also supported by comments made by the US Treasury after it said that it would pressure Japan to avoid ‘targeting its exchange rate for competitive purposes’.
“We might just see investors hold off on adding to Yen shorts” with the U.S. “finger-pointing” about the Bank of Japan’s policy regarding the Yen, said Mike Jones, a currency strategist at Bank of New Zealand in Wellington.
The G-20 is due to meet on April 18th-19th in Washington and is expected to see the European Union claiming the lack of credible medium-term fiscal consolidation plans in the US and Japan. The last meeting of the Group saw finance ministers agree that Japan could stimulate itsstagnant economy as long as policy makers refrained from publicly advocating a weaker Yen. With the Yen having deprecated by 21% in the past six-months the prospect of a currency war has returned.
“You can’t tell me there’s not a currency war going on,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., wrote in a post on Twitter yesterday. “Sell Yen,” he said.
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