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Traders went into full bear mode on the yen this week thanks to weak economic updates from Japan and possibly due to the mostly positive lean in global risk sentiment.

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart
Overlay of Inverted JPY Pairs: 1-Hour Forex Chart

Japanese Headlines and Economic data

Major Market Drivers for the Japanese Yen

Japanese yen pairs initially popped at the week open but quickly turned as Japanese economic updates were released. The broad turn lower in yen pairs correlates with the latest M2 money supply data showing a bigger increase of 2.4% vs. 2.3% in the previous month, followed by the latest machine tool orders showing a drop to the lowest level since 2009.  And the negative Japanese updates didn’t stop there as the latest government business outlook survey showed a negative read for the current quarter (as well as the next two quarters) and Japanese machinery orders fall at the fastest rate since September.

Overall, the updates do not present a positive outlook for Japan’s export-driven economy,which is a sentiment that was confirmed by the Bank of Japan during this week’s monetary policy meeting and statement. The BOJ made no changes to monetary policy as expected, but their rhetoric took a surprisingly more pessimistic tone on exports, citing risks from U.S. protectionist policies, Brexit, and developments in emerging and commodity-exporting economies.

Risk sentiment potentially had an affect on Japanese yen pairs as well this week. There wasn’t a direct catalyst, but arguments could be made that positive surprises from this week’s top tier global economic reports (most notably a bounce back in U.S. retail sales and the latest U.K. GDP report) and likely from the latest Brexit developments (no-deal Brexit rejected; Brexit extension supported; signs of deal still being worked on between DUP and U.K. government) had traders leaning risk-on this week.

We also got positive signs on the ongoing U.S.-China trade situation and potential stimulus moves as China plans to reform its foreign investment laws and vows new tax cuts.  All combined these are likely the reasons why the safe haven currencies like the U.S. dollar and Japanese yen fell on the week while equities and oil prices trended higher overall. And based on the price action above of Japanese yen pairs this week, we can easily say the the yen was the worst performer of the week, losing out to every other major currency at the Friday close.