Pound to Yen (GBP/JPY) Exchange Rate Higher as Asian Stocks Rally, USD/JPY Climbs

During Australasian trading the Yen softened against rivals like the Pound, US Dollar and Euro as the appeal of safe-haven assets eased and Asian stocks climbed.

The USD/JPY pairing advanced to its strongest level for over one-week while the GBP/JPY exchange rate achieved a high of 172.8040.

Yesterday the Yen came under pressure as a result of less-than-impressive current account figures.

A report showing that Japan’s annual current account surplus fell to its lowest level for almost thirty years led to concerns that the Bank of Japan might implement policy measures to weaken the domestic currency.

While exports climbed by 12.2 per cent, imports surged by 19.6 per cent.

This data supports the International Monetary Fund’s decision to negatively revise its growth forecast for Japan. The IMF now anticipates that Japan’s economy will expand by 1.4 per cent in 2014 and 1 per cent in 2015.

The Pound, meanwhile, remained supported as the Confederation of British Industry positively revised its growth forecasts for the UK ahead of the release of British employment figures.

The appeal of the low-risk Yen was dented overnight as the MSCI Asia Pacific Index of stocks climbed by 1.1 per cent.

The expectation that today’s US retail sales report will show a gain in April also pushed the Yen lower.

According to an analyst with IG Markets Securities Ltd; ‘Risk appetite boosted by stocks gains triggered Yen selling. The China data had some dampening effect on the Aussie, although declines have been limited’.

Although retail sales and industrial production figures for China failed to meet forecasts, investors didn’t flock to the Yen in the aftermath of their publication.

However, if today’s US advance retail sales report doesn’t show the 0.4 per cent gain anticipated, the Yen could recover losses.

Meanwhile, a lack of UK data is likely to limit movement in the GBP/JPY pairing today. The expectation that Wednesday’s UK jobs data will show a decline in the unemployment rate may keep the Pound buoyed but a disappointing result could bring an end to Sterling’s bullish relationship with its peers.

Over the next few days Japanese data to be aware of includes annualised first quarter GDP, consumer spending, business spending, foreign bond buying, industrial production and capacity utilisation.