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The Japanese yen turns out another net positive week as global risk aversion sentiment reached crisis levels despite massive stimulus measures announced this week from all major central banks.
Japanese Headlines and Economic data
Monday:
- Japan January machinery orders rebound, but virus fallout dims outlook
- BOJ to publish January meeting minutes, March summary earlier than scheduled
- BOJ vows to step up asset purchases to curb virus’ economic impact
- Bank of Japan raises ETF purchase limit to calm coronavirus fears
- Big risk aversion day as traders priced in the growing probability of a big hit to the global economy by the coronavirus pandemic, now realized after U.S. President Donald Trump said the U.S. economy “may be” headed for recession. As usual, the Japanese yen benefited from the risk aversion environment, starting the week up against the major currencies despite the latest stimulative actions announced by the Bank of Japan, the Federal Reserve and the Reserve Bank of New Zealand.
Tuesday:
- Japan Industrial production revised up to 1.0% in January m/m
- A little bit of pullback from early week strength as news of stimulus actions from around the globe (including a potential $1 trillion package from the U.S.) starts to calm traders down from expectations of an economic meltdown. The Japanese yen pulls back slightly against the majors on the session.
Wednesday:
- Japan’s Abe to launch panel to mull big stimulus package
- Japan’s exports fall, imports from China slump as virus impact widens
- Another big risk aversion day in the financial markets, which actually saw a break in the usual risk behavior relationships as even bonds and gold fell. This is likely due to the rising concerns of bank liquidity, an extreme demand for U.S. dollars, and the rising probability of a deep global recession.
Thursday:
- BOJ official Amamiya: Central bank will take additional monetary policy steps without hesitation
- Japanese national core CPI slipped from 0.8% to 0.6% as expected
- Japanese all industries activity index improved 0.8% after previous 0.1% dip
- Risk sentiment swings positive on the Thursday trading session, likely a reaction to the continued stream of stimulus actions by global central banks, including a €750bn bond-buying program from the ECB, interest rate cuts and QE from the RBA, and the announcement of a third coronavirus aid package this week from U.S. lawmakers. As expected, the Japanese yen fell against the majors as the environment shifted from an extremely negative vibe.
Friday:
- Choppy session for yen pairs, and with no major Japanese events or headlines it was likely moving on counter currency news and coronavirus updates, including actions to limit the accelerating number of cases of coronavirus, and the damage it is doing to financial market liquidity and the economy.
- And in case you missed it, here is a cheat sheet on Who Has Done What for Their Economies Since the Coronavirus Pandemic Hit