It was a losing kind of week for the Japanese yen thanks to broad risk-on sentiment coming strong early in the week and hanging on.
Japanese Headlines and Economic data
Japan manufacturers’ less pessimistic in November: Reuters Tankan – “The Reuters Tankan sentiment index for manufacturers showed a marked improvement in November, rising to minus 13 from minus 26 in the previous month. But the index remained in negative territory for a 16th straight month.”
The big market driver of the week came on Monday from Pfizer / BioNTech, announcing that their COVID vaccine is more than 90% effective. This sparked a big risk-on move across the financial markets as traders priced in the odds of an economic recovery coming sooner rather than later. This sentiment did fade by the Monday U.S. session, but lingered on to influence the markets through most of the week. The Japanese yen was a big loser on the news and was unable to recover by Friday.
- “Oct bank lending up 6.2% yr/yr vs +6.4% in Sept.”
- “Big firms repaying loans, small firms still struggling”
Sentiment among Japan ‘economy watchers’ tops boom-or-bust line – The diffusion index of confidence among “economy watchers” in their current conditions compared with three months ago rose 5.2 points from September to 54.5, the first reading over 50 since the 50.1 seen in January 2018.
The Japanese yen began to broad move higher Wednesday and Thursday, likely a move supported by a broad shift in risk sentiment. It’s likely traders were coming off vaccine news highs and focusing on the rising COVID cases in Europe and the U.S., as well as the falling odds of a new stimulus bill coming from the U.S. government.
Japan’s machinery orders fall, clouding outlook for capital spending recovery – “Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, lost 4.4% in September after a 0.2% rise in the previous month.”
Yen bounces as vaccine boost fades – “investors crept back in to the safe-haven currency on concerns that successful tests of a COVID-19 vaccine may not be enough to offset the economic damage of a trying winter in Europe and the United States.”