Pound to Yen Exchange Rate: GBP to JPY Stronger as Japanese Stocks Rise

October 30, 2014 - Written by Frank Davies

STORY LINK Pound to Yen Exchange Rate: GBP to JPY Stronger as Japanese Stocks Rise

The British Pound to Yen exchange rate (GBP/JPY) strengthened on Thursday as Bank of Japan Governor Haruhiko Kuroda asserted that the decline in the local currency will have a positive impact on Japan’s economic performance.

Although Kuroda was explicitly referencing the Yen’s depreciation against the US Dollar, the safe-haven asset has also eased lower against peers like the Pound and Euro.

However, while Kuroda was positive about the Yen’s slide to 110.09 against the US Dollar (a six-year low) the central bank chief also indicated that further drops in the currency would be a hindrance.

In the opinion of one former Bank of Japan official; ‘A 105-110 Yen range would make everyone in Japan happy as it’s the closest thing to being just right for the widest swath of the economy. We’ve seen that the threat of an exchange rate weaker than 110 Yen per Dollar made a lot of people uneasy, so if the Yen were to strengthen to 105 per Dollar, I doubt we’d hear any complaints.’

The USD/JPY was also able to advance by 0.7% in the immediate aftermath of the Federal Open Market Committee’s decision to conclude quantitative easing and promote a prolonged period of interest rate stability.

The US Dollar to Yen exchange rate achieved a three-week high and the fact that Japanese stocks climbed saw the Yen also soften against peers like the Pound (GBP/JPY). Industry expert Yusuke Kuwayama noted; ‘Uncertainty has disappeared in terms of the overseas situation, and US earnings are supporting the market. Overall, Japanese companies, especially exporters, are showing good results.’

The Pound to Yen continued trading in a stronger position as Japanese data showed a decline in Vehicle Production. Production fell by -2.6% on the year in September, a shallower annual decline that the -6.7% recorded in August.

Mixed Day for the Pound

Meanwhile, the Pound put on a mixed performance following the publication of UK House Price data. While house prices were shown to have increased by more-than-expected on the month in October, the annual pace of house price growth slowed to a nine month low of 9.0%. This was down from figure of 9.4% in September and marked a second month of declines.

This report followed yesterday’s Mortgage Approvals figures. The number of mortgage approvals eased to a 14-month low, adding to the argument that the UK’s housing market is cooling and reducing the odds of an earlier rate increase from the Bank of England.

In the opinion of economist Robert Gardner; ‘A variety of indicators suggest that the market has lost momentum. Some forward looking indicators, such as new buyer enquiries, suggest that activity may soften further in the near term, especially in London.’

Before the weekend a stream of economic reports for Japan could cause movement in the GBP/JPY.

Economists will be paying particular attention to Japan’s National Consumer Price Index, Household spending figures, Jobless Rate and National Consumer Price Index.

Of course the Bank of Japan’s Monetary Policy statement will also be in focus. Final GBP/JPY movement could be occasioned by the UK’s Consumer Confidence index.

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