A round of bad luck for the Japanese yen this week as global risk sentiment comes back from the extreme negative levels from last week.
Japanese Headlines and Economic data
- Early pop higher for the yen on Monday, likely due to the continued negative risk sentiment fueled by the ongoing coronavirus pandemic and likely economic damage to the global economy. It’s also likely the the failure of the stimulus bill to pass the U.S. Senate added to market fears.
- It was a quick turn around in sentiment, though, during the U.S. session towards positive, likely sparked by a pledge from the Federal Reserve to support the markets with no limits.
- Banks borrow record $89.3B from BOJ’s dollar funding operations on Tuesday
- Japan’s manufacturing contracts the sharpest since April 2009, goods demand falls at its steepest in 11 years
- Japan’s services PMI drops from 46.8 to 32.7, the lowest ever, as COVID-19 halts new business and causes cancellations
- Officials postpone the 2020 Olympics amid coronavirus pandemic
- Along with the bad economic updates from Japan and news of the postponement of the 2020 Olympics, positive global risk sentiment was on the rise through Wednesday, likely on the continue stream of pledges from governments and central banks (ECB Intends to Be Major Buyer in Commercial Player Market, Canada doubles value of coronavirus stimulus package, etc.) to shield the world from an economic meltdown.
- Bank of Japan sees deeper economic pain, even after emergency easing
- Gov’t mulls coronavirus cash handouts topping 12,000 yen for all in Japan
- No Japanese catalysts on the session so the likely pressure on the Japanese yen (with exception to the U.S dollar) came from the continued rise in global risk sentiment, once again on more news of stimulus measures to support the global economy (e.g., ECB shakes off limits on new €750bn bond buying plan, U.S. Senate passes $2T disaster aid bill, South Korea to relax FX liquidity rules for banks, India cuts rates & unleashes $50B in stimulus, etc.)
- Tokyo core CPI dipped from 0.5% to 0.4% as expected
- The Japanese yen found some buyers during the Friday session as risk sentiment soured a bit, possibly on traders fearing that the U.S. stimulus bill may hit a snag and on the continued acceleration of cases around the globe. Fortunately for a lot people out there hurt by the coronavirus pandemic, the bill was later passed and signed by President Trump in the afternoon session, sparking some flows out of safe havens (and the Dollar) heading into the weekend.