Japanese Yen last week, sharply appreciated against the USD touching its highest levels over the last one and one half years and is currently trading at JPY 108.07. The level of JPY 108.07 was last seen in October 2014 when the BoJ implemented it’s second round of aggressive asset purchase program. Yen year to date has appreciated nearly 12% against the USD. Sharp appreciation of Yen is defying Japan’s effort to weaken its currency and is an indication that policymakers in leading economies are running out of tools to fight persistent deflation and slow growth in the economy.
Japanese officials last week indicated that they would be willing to take additional measures to halt Yen’s sharp appreciation. BoJ is scheduled to meet on 28th April. Chief Cabinet secretary Yoshihide Suga at a news conference said that the “government is closely watching changes in foreign exchange market with a sense of tension, and we’ll take measures as appropriate”.
In a quarterly meeting of BoJ branch managers, Governor Haruhiko Kuroda said that the central bank is ready to take additional monetary easing steps if needed to hit the bank’s 2% inflation target.
Yen appreciated last week on high risk aversion as investors were worried about global economic growth. Minutes from the Fed’s March meeting added to the weakness in the market sentiment as it showed that many of its policymakers sees risks to the US economy from global factors, underscoring the message that the pace of rate increases will be gradual, bringing broad weakness to the USD. USD Index (DXY), which tracks the movement of the USD against six major currencies, declined by 0.41% on weekly basis closing at levels of 94.24.
USD started the week on a lower note as market sentiment continued to remain weak after Fed Chair Janet Yellen in her speech to the Economic Club of New York last week, indicated slower pace of interest rate hikes in 2016.
U.S. Census Bureau on Monday reported that factory orders declined by 1.7% in the month of March, which was in line with the expectations followed by a rise of 1.2% in January.
U.S. Commerce Department on Tuesday reported that the trade deficit widened to USD 47.06 billion in the month of February from USD 45.88 billion in January, against the expectation of trade deficit widening to USD 46.2 billion in February.
USD received some support on better than expected U.S. jobless claims data released on Thursday. U.S. Department of Labour reported that number of individuals filing for initial jobless benefits in the week ended 2nd April fell by 9,000 to 267,000 from the previous week’s total of 276,000 against the expectation of a fall of 6,000 to 270,000.
Brazilian Real last week depreciated by 1.02% against USD, halting its month long rally during which Real appreciated by nearly 10%. Renewed volatility in commodity prices and weak economic growth outlook has driven down the currency against USD last week. Real came under further pressure after Brazilian judge ruled on Tuesday that the country’s vice president Michel Temer should face impeachment proceedings just like President Dilma Rousseff. The ruling raises the possibility that both the president and the vice-president could now be removed, further deepening the country’s political crisis.
Asian currencies were largely mixed against the USD last week. Australian Dollar depreciated by 1.58%, New Zealand Dollar depreciated by 1.38%, Japanese Yen appreciated by 3.35% against USD and by 3.26% against Euro, South Korean Won appreciated by 0.02%, Philippines Peso depreciated by 0.19%, Indonesian Rupiah appreciated by 0.18%, Indian Rupee depreciated by 0.33% against USD and by 0.52% against Euro, Chinese Yuan appreciated by 0.28%, Malaysian Ringgit depreciated by 0.28% and Thai Baht appreciated by 0.18%.