Yen Exchange Rate Today: JPY Hits Three Week Best Level vs US Dollar (USD)

October 10, 2014 - Written by Ben Hughes

STORY LINK Yen Exchange Rate Today: JPY Hits Three Week Best Level vs US Dollar (USD)

The Japanese Yen exchange rate (JPY) advanced to a 3-week best level against the US Dollar (USD) on Thursday after investors reduced their bets that the Federal Reserve will raise interest rates sooner than initially expected. The Yen advanced as the FOMC minutes weakened the ‘Greenback’ by being far more dovish than forecast.

The dovish minute brought the US Dollars 12-week long run of gains to an abrupt halt as they revealed that policy makers were growing increasingly concerned over the strength of the US Dollar and a slowdown in the global economy.

The report also showed that policy makers had debated over the tone set by the bank with some arguing that the banks current language painted the wrong picture on the timing as to when an interest rate hike could occur. They argued that a rate rise should be linked to US economic progress.

"Fed minutes caught the market wrong-footed. Considering the hawkish market interpretation of the Fed meeting in September, on the back of higher "dots", the Fed's more cautious language in the minutes caused some confusion. We see positioning as the key factor for the market's reaction. ,’ said Susanne Galler, currency strategist at Jefferies.

The Japanese Yen was also found support from data which showed that Japan’s leading gauge of capital spending increased for a third consecutive month in August.

Core Machinery Orders rose by 4.7% in a monthly basis beating economist expectations for a figure of 0.9%.

Despite the positive data, analysts continued to stress that the Japanese economy is weak and was not enough to counter concerns that the economy is losing traction.

‘Today’s data in itself is positive as it confirms steady capital spending. However, companies remain far from being assured about the outlook. If consumption and factory output remain sluggish, that could force them to revise down their capital spending plans,’ said Takeshi Minami, chief economist at Norinchukin Research Institute.

The Yen also firmed on comments made by Bank of Japan Governor Haruhiko Kuroda who repeated his view that the pace of price inflation will increase. In his speech to the Economic Club of New York, Kuroda also repeated his mantra that the BOJ will continue its aggressive easing until 2% inflation is well anchored.

The Japanese Yen was also able to advance against the Pound as the markets awaited the Bank of England’s latest Interest Rate and Quantitative easing decision.

Economists are widely expecting that policy makers will leave interest rates unchanged at the record low level of 0.5% and maintain its monthly bond-buying programme at £375 billion per month.

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