4 Feb 2014
Flash: Yen continues to weaken on Emerging Market instability - BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that Yen has continued to strengthen on heightened investor concerns over emerging market instability.
Key Quotes
"The yen has continued to strengthen in the Asian trading session with USD/JPY moving closer to key support at the 100.00-level just above which the 200-day moving average is also located. The strengthening yen reflects heightened investor concern that developments in emerging markets may lead to a material slowdown in global growth."
"Those concerns were reinforced yesterday by the release of the weaker than expected ISM manufacturing survey which revealed that business confidence declined sharply by 5.2 point to 51.3 in January. The scale of the decline in business confidence has been exaggerated by the harsh winter weather. The report also likely signals that underlying economic growth in the US will lose some momentum in Q1 following very robust growth in the second half of 2013 averaging an annualized rate of 3.6%, which was boosted by a large inventory build."
"Still we remain comfortable with our view that for the year as whole the US economy will record stronger growth in 2014. In addition, we expect the US debt ceiling to be raised before the end of the month given that both political parties have already agreed upon spending plans for the next two fiscal years."
"Overall we remain of the view that the strengthening economic recovery in the advanced economies will help offset slowing growth in the developing economies in 2014, although that view would be more severely tested if economic growth in China slowed more sharply, which is not our base case scenario. The strengthening of the yen is prompting a sharper reversal in the Japanese equity market with the Nikkei 225 index having declined by 14% so far in 2014 although it still remains just over 60% higher than in late 2012 prior to the introduction of Abenomics policies."
Key Quotes
"The yen has continued to strengthen in the Asian trading session with USD/JPY moving closer to key support at the 100.00-level just above which the 200-day moving average is also located. The strengthening yen reflects heightened investor concern that developments in emerging markets may lead to a material slowdown in global growth."
"Those concerns were reinforced yesterday by the release of the weaker than expected ISM manufacturing survey which revealed that business confidence declined sharply by 5.2 point to 51.3 in January. The scale of the decline in business confidence has been exaggerated by the harsh winter weather. The report also likely signals that underlying economic growth in the US will lose some momentum in Q1 following very robust growth in the second half of 2013 averaging an annualized rate of 3.6%, which was boosted by a large inventory build."
"Still we remain comfortable with our view that for the year as whole the US economy will record stronger growth in 2014. In addition, we expect the US debt ceiling to be raised before the end of the month given that both political parties have already agreed upon spending plans for the next two fiscal years."
"Overall we remain of the view that the strengthening economic recovery in the advanced economies will help offset slowing growth in the developing economies in 2014, although that view would be more severely tested if economic growth in China slowed more sharply, which is not our base case scenario. The strengthening of the yen is prompting a sharper reversal in the Japanese equity market with the Nikkei 225 index having declined by 14% so far in 2014 although it still remains just over 60% higher than in late 2012 prior to the introduction of Abenomics policies."