The Pound (GBP) advanced sharply against the Japanese Yen (JPY) on Wednesday after the latest Bank of England Minutes supported Sterling and as disappointing trade data weighed heavily upon the Japanese currency.
Japan’s currency declined against the majority of its most traded peers and declined to a four-month low against the US Dollar after data showed that the Asian nation posted its 25th consecutive monthly trade deficit in July.
The value of goods imported into the Japanese economy continued to out value the amount of goods exported to the rest of the world.
The data disappointed the markets as the sharp fall in the value of the Yen has done little to support trade.
Energy once again was one of the Asian nation’s major imports as it continues to struggle with higher energy costs due to the closure of all Japans nuclear power stations. All of the stations were closed due to safety concerns following the 2011 earthquake and consequential reactor leak at the Fukishima plant.
Despite that, official data showed that Japan’s trade deficit narrowed to ¥1.02 trillion last month, from ¥1.07 trillion in June, whose figure was revised from a previously estimated deficit of ¥1.08 trillion. The fall was worse than the number
Analysts had expected the trade deficit to narrow to ¥0.77 trillion in July.
‘July’s trade deficit was larger than expected, and indicates that net trade is unlikely to provide much support to GDP growth in the third quarter. However, the recent improvement in external demand suggests that the shortfall will narrow further towards the end of the year,’ said Capital Economics.
Sterling meanwhile continued to find support from the publication of the Bank of England’s latest monetary policy meeting minutes. The report showed that two out of nine members of the Central Bank’s Monetary Policy Committee voted in favour of raising interest rates before the end of the year.
The minutes caused traders to raise their bets that an interest rate hike by the BoE will occur before the end of the year. Doubts remain however as the release of weaker than forecast inflation data at the start of the week created confusion as to when a rate hike will happen.
‘The minutes of Augusts UK MPC meeting, revealing the first split vote on interest rates since July 2011, suggest that it would be foolish to rule out the possibility of a 2014 hike. External members Martin Weale and Ian McCafferty both voted to raise interest rates to 0.75%. Nonetheless, recent data has eased the pressure on the committee to hike rates.
Pound Sterling to Japanese Yen Exchange Rate Forecast
The Japanese Yen could recover some ground on Thursday if the latest Japanese Markit Manufacturing PMI data comes in better than forecast.
Economists are forecasting the index to show that the sector expanded from July’s figure of 50.5 to 51.7 in August.
Sterling could also find further support if Thursdays retail sales data come in positively.
Pound Sterling to Japanese Yen Gains as Risk Aversion Lessens
Despite the fact that Japanese domestic data has been positive today and UK domestic data has been negative, the Pound to Japanese Yen exchange rate has continued to gain.
UK Retail sales saw a year-on-year declination having only shown growth of 3.4% compared to the previous figure of 3.8%.
Meanwhile Japanese manufacturing hit 52.4 despite having been forecast to rise to 51.5 from the previous figure of 51.7. The positive data should have resulted in gains for the Yen, but has not as yet.
Perhaps one reason for the lack of Japanese Yen gain is the bullish behaviour of the ‘Greenback’ (USD). As traders forecast an increase to the Federal Reserve bank rate the US Dollar has gained significantly; resulting in a retraction of the need for safe haven currencies.
Japanese Yen (JPY) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,Japanese Yen,171.9600 ,
Euro,, Japanese Yen,137.2300 ,
US Dollar,, Japanese Yen,103.3400 ,
Australian Dollar,, Japanese Yen,95.9300 ,
[/table]
Comments are closed.