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April 24, 2019
USD / JPY were held around 111.65 due to weak reports on Japanese industrial production, while US-Japan trade negotiations encountered the first obstacle. Yesterday, the Yen closed higher in the range of 111.62 against the US Dollar. However, the movement of USD / JPY stretched again in early European trading.
Amid the anticipation of Japanese exchanges ahead of the start of the 10-day holiday on Saturday, USD / JPY was held at around 111.65 due to weak reports of Japanese industrial production, while US-Japan trade negotiations encountered the first obstacle.
In the preliminary report, Japanese Industrial Production recorded a 0.9 percent decline (Month-over-Month) during March. On an annual basis, industrial production even recorded the worst record since 2015 with a decline of 4.6 percent. Although retail sales and Tokyo consumer inflation managed to exceed expectations, industry data indicated that the complexity of the global trade climate is currently weighing on the world's third-largest economy.
As if confirming the gloomy business prospects, the leading Japanese game manufacturer, Nintendo, delivered the target of selling superior products in a number that was considered "too conservative" by market players. In fact, the total sales of software and hardware during the past fiscal year have failed to meet expectations.
Meanwhile, the first spark of conflict emerged in the ongoing bilateral trade negotiations between the US and Japan. Bloomberg reported that Japanese Finance Minister Taro Aso dismissed the United States' request to discuss currency policies in the negotiations. "We cannot agree to any discussion that links trade and currency policies," Aso told reporters in Washington DC, after meeting US Treasury Secretary Steven.
The Japanese claimed that this was the first time the US had offended the currency directly in the context of trade negotiations. Previously, they believed that the issue was secondary, and had not been touched upon in talks between Economy Minister Toshimitsu Motegi and US Trade Representative Robert Lighthizer which began last week.
This situation aroused the alertness of investors and traders ahead of a meeting between US President Donald Trump and Japanese Prime Minister Shinzo Abe on Friday. On the other hand, speculators began releasing the Yen before the commencement of the 10-day holiday in order to change the Emperor. The closure of Japanese exchanges over the coming week has raised concerns about the probability of a "flash crash" due to lack of liquidity.
Experts rank market participants to be aware of the possibility of anomalies in USD / JPY and other Yen cross pairs due to lack of liquidity. In the Asian session, the USD / JPY currency pair had toppled to print a daily low at 111.65. However, the Greenback rebounded back quickly, reaching a range of 111.87 when the news was written at the beginning of the European session.
Market volatility began to wriggle with the reopening of the Australian and New Zealand exchanges after the Easter celebration. However, the movement was still minimal due to a lack of catalysts. In the midst of a market landscape like this, the decline in the USD / JPY this morning was a matter of conversation.
Masafumi Yamamoto, currency strategist at Mizuho Securities, told Reuters that he considered there was no strong drive which had caused the Greenback to fall.
Furthermore, he indicated that the USD / JPY movement was triggered by risk-off interest in the Japanese equity market. According to him, the strengthening of the Yen against the US Dollar will be temporary as long as central banks around the world continue to choose to delay the increase in interest rates.
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