USDJPY indecisive and volatile

The Japanese yen has been impulsive for the week with mixed macro economic data released last week. The Japanese Household Confidence Index rose for the second consecutive month from 39 to 39.8%, which was much below the forecast of 40.6%. Also with no surprises, the Bank of Japan (BOJ) kept the overnight call rates unchanged at 0.10%. However BOJ doubled the budget of the 3-month lending programme, which it announced last December, from 10 Trillion JPY to 20 Trillion JPY. This effort would increase the liquidity of the market which will make curb to the falling prices of the export driven economy. In spite of the stimulus, the Japanese Business Sentiment Manufacturing Index has dropped from 13.2 to 4.2, which is a concern for the economy in the long term. However the BOJ has upgraded the overall assessment of the economy as “picking up steadily”, is ready to take “aggressive and comprehensive measures” to tackle the deflationary pressures. Also, the Japanese All Industry Activity, which indicates the change in total value of the goods and services purchased by businesses has grown from negative growth to positive (from -0.2% to 3.8%), which is a very encouraging number. But the US Fed decision to keep the Federal Fund Rate near zero did not lure the US Dollar against the JPY. Also, The Reserve Bank of India’s unexpected decision to increase the interest rate by 25 bps affected the dollar-yen pair where the dollar rose against the yen.

Currently, the JPY is facing a resistance at 91.13, which has not been broken during the month and the near-term support at 89.67. Japan’s monetary policy scheduled to be released this week will give investors the outlook on overall economic performance for JPY and also how the monetary policy would be in future to control deflation. Tokyo’s Core Consumer price Index (CPI) and the National Core CPI publications should be watched by investors.
Mohammed Rabbani