USD/JPY Sentiment Bullish as Rate Spikes Up on BOJ Intervention Talks

By Barbara Zigah

The Japanese Yen spiked lower versus the greenback during the Asian session on Thursday as rumors of the Bank of Japan intervening in the currency markets proceeded to weaken the Yen spread. While actual market intervention was not confirmed by the BOJ, Japan’s Finance Minister Yoshihiko Noda upped his verbal efforts to weaken the Yen by noting that, “The movement doesn’t reflect fundamentals and has been one-sided” with respect to the recent Yen gains.

USD/JPY sentiment remained bullish overall as the rate traded from a low of 78.45 made on Thursday to peak as high as 79.59 just a few hours later in a dramatic reversal for the pair. The low point was the strongest the Yen had been observed at since USD/JPY reached an all time low of 76.41 on March 17^th. After the spike upward in USD/JPY, the Yen recovered somewhat to see the rate range trade between 79.26 and 78.88 for the rest of the day and into Friday’s early session.

Another key factor continuing to put pressure on USD/JPY was Wednesday’s dovish comments by Fed Chairman Ben Bernanke that indicated the Fed would ease further if softer economic growth conditions warranted. Also weakening the greenback is the ongoing debate over raising the U.S. debt ceiling that has already led to U.S. debt downgrade warnings from the Moody’s and S&P rating agencies.

Nevertheless, support for the U.S. Dollar emerged after the release of some relatively favorable data on the U.S. employment front after last week’s spectacularly poor Non-Farms Payrolls.  Specifically, Weekly Initial Jobless Claims fell to 405,000 compared with the 413,000 expected and the former 427,000 result.  U.S. Retail Sales also rose by +0.1% to show an improvement over the -0.1% decline economists’ had expected. Furthermore, while PPI fell more than expected at -0.4%, Core PPI rose by 0.3% on the month.

Also, the BOJ late yesterday released its Monetary Policy Meeting Minutes for the June 13^th to June 14^th monetary policy board meeting. The minutes indicated that two members of the board saw potential for further easing. Also, the minutes noted, “Many members expressed the view that downside risks from overseas economies have somewhat heightened.”

In the absence of Japanese data out on Friday, U.S. data includes: Core CPI (0.2%), CPI (-0.1%), the Empire State Manufacturing Index (4.5) and the Preliminary University of Michigan Consumer Sentiment survey (72.5).