The Japanese yen begins the new year as the one of the biggest losers among the major currencies. Broad positive risk sentiment was the likely driver, supported by expectations of more stimulus and hopes of a recovery from the pandemic.
It’s also possible that the rising cases in Japan to record levels may have had a negative influence on the yen as well.
Japanese Headlines and Economic data
Japan manufacturing sector stabilizes at end of 2020 – “The headline au Jibun Bank Japan Manufacturing Purchasing
Managers’ Index™ (PMI®) – a composite single-figure indicator of manufacturing performance – rose from 49.0 in November to reach the 50.0 no-change threshold in December. This marked the highest reading of the PMI since April 2019 as the sector continued to gradually recover from dampened operating conditions exacerbated by the COVID-19 pandemic.”
Japan’s Dec consumer confidence worsens, govt cuts view – “The survey’s sentiment index for general households, which includes views on incomes and jobs, fell to 31.8 in December, versus 33.7 in November.”
The Japanese yen turns lower for the week during the Wednesday session, likely a reaction to U.S. political developments. Markets leaned risk-on after it appeared the Democratic party retakes control of the U.S. Senate, increasing speculation that more stimulus will be coming to support those hit hard by the pandemic. This and more positive news on the vaccine front (Moderna COVID-19 vaccine approved in Europe, Dutch play catch-up) was the likely catalysts for traders to lean risk-on for the rest of the week.
Japan declares emergency for Tokyo area as cases spike – “Tokyo has logged record numbers of daily cases for two straight days, after 1,591 on Wednesday. Nationwide, cases have been growing steadily by more than 5,000 a day.”