Yen hovers near three-week low under supervision of BOJ
Yen declined in Asian trade on Friday against a basket of major rivals, extending losses for the third straight session against the dollar and almost touching three-week lows, under close supervision of the Bank of Japan which could intervene at any time.
Recent government data showed inflationary pressures have receded on BOJ policymakers, further damaging the odds of Japanese rate hikes this year.
The Price
The USD/JPY pair rose 0.2% today to 157.15 yen, with a session-low at 156.88, after losing 0.1% on Thursday, the second loss in a row, plumbing three-week lows at 157.20.
Earlier US manufacturing, services, and labor data beat expectations, in turn hurting the odds of a Fed rate cut in the summer.
The 160 Red Line
The 160 has become a red line for the Bank of Japan, so it’s likely it’ll intervene if the USD/JPY pair threatens to fall once again below it.
Japanese authorities intervened in late April and pumped $60 billion in the forex market to bring the yen higher against main rivals after it hit 1990 lows.
Transient Intervention
Analysts believe that any intervention by the Bank of Japan would only lead to a transient spike in yen’s value, as the fundamentals of the stark US-Japan interest rate gap continues to favor the dollar against the yen.
Rate Gap
The current US-Japan interest rate gap stands at 540 basis points in favor of the US.
Such a gap could shrink once or twice this year as the Federal Reserve prepares to cut interest rates and ease policies.
Japanese Inflation
Earlier government data showed Japan’s consumer prices, excluding fresh food, rose 2.2% y/y in April, matching expectations, after rising 2.6% in March.
Slower prices indicate that inflation has been largely brought under control, reducing pressure on the BOJ.
Kiwi stabilizes after release of economic data
The New Zealand dollar stabilized on Thursday after the release of data and the policy decisions of the central bank.
Earlier government data showed retail sales rose 0.5% in the first quarter, while analysts expected a 0.3% drop.
Core sales rose 0.4%, while analysts expected no change.
The Reserve Bank of New Zealand recently decided to hold interest rates unchanged at 5.5%.
On trading, NZD/USD stabilized at 0.6098 as of 21:04 GMT.
Sterling
The pound fell 0.2% against the US dollar as of 21:05 GMT to 1.2692.
The UK manufacturing PMI rallied to 51.3 from 49.5 in the previous reading.
On the other hand, the services PMI slid to 52.9 from 54.7 in the previous reading.
The US Dollar
The dollar index rose 0.1% as of 20:43 GMT to 105.07, with a session-high at 105.1, and a low at 104.6.
Earlier US data showed unemployment claims fell to 215 thousand last week from 223 thousand.
The US manufacturing PMI rose to 50.9 in May from 50.
The services PMI jumped to 54.8 this month, while analysts expected a drop to 51.2.
NASDAQ continues to mark record highs
Most US stock indices rose today as markets process the Federal Reserve’s meeting minutes in addition to recent data.
The latest Federal Reserve’s meeting minutes were more bullish than expected, showing that many officials are still dismissive of any steps towards policy easing.
They focused on ongoing inflationary risks, including geopolitical events, and pointed to the pressure undergone by low-income consumers due to higher prices.
As for data, US unemployment claims fell to 215 thousand last week from 223 thousand, below estimates of 220 thousand.
On trading, Dow Jones fell 0.7%, or 301 points as of 17:45 GMT to 39,371, while S&P 500 rose 0.2%, or 8 points to 5315, as NASDAQ added 0.7%, or 119 points to 16,920.
Oil prices add over 1.5% following strong manufacturing data
Global oil prices rose over 1.5% in American trade on Thursday, on track for the first profit in four days following strong European, UK, and US manufacturing data.
Such data underpinned hopes of increasing global demand on fuel, and overshadowed negative US crude inventory data.
Prices
US crude rose 1.8% to $78.63 a barrel, with a session-low at $76.86.
Brent rallied 1.6% today to $82.93 a barrel, with a session-low at $81.23.
US crude lost 1.2% on Wednesday, while Brent shed 1.1%, the third decline in a row amid concerns about weak US demand.
Strong Industrial Data
Recent data showed the European manufacturing sector rebounded in May, with the British industrial sector rushing into growth territory this month, alongside similar growth in the US manufacturing sector.
Such data is a clear sign of improving global GDP growth in the second quarter of the year, in turn boosting fuel demand.
US Stocks
The Energy Information Administration reported a buildup of 1.8 million barrels in US crude stocks last week to 458.8 million barrels, while analysts expected a drop of 2.4 million barrels.
US gasoline stocks fell by 0.9 million barrels to 226.8 million barrels, while distillate stocks rose by 0.4 million barrels to 116.7 million barrels.
US Output
The EIA reported no change in US crude stocks at 13.1 million barrels last week for the tenth week in a row.
Prices Outlook
Commodities’ analysts at UBS said in a memo that oil prices have strived to advance this month as investors remain cautious in regards to ongoing restrictive monetary policies.
The analysts also pointed to persistent concerns about the increasing global crude inventories after a mild winter in parts of the northern hemisphere.
The bank’s analysts expect the oil market to undergo a deficit, with Brent likely rising to $91 a barrel in the next few months.