The USD/JPY declined on Aug. 28, after Russia-Ukraine conflicts escalated and the U.S. government revised the nation’s economic growth higher for the second quarter.
US Q2 GDP revised upward
The currency pair was 0.1 percent lower at 103.76 by 11:08 a.m. in New York, according to Bloomberg. These movements happened after the U.S. Commerce Department indicated that during April, May and June, U.S. gross domestic product grew at an annualized rate of 4.2 percent, compared to the 4.0 percent specified previously.
The revised figure for the second quarter surpassed the median forecast of 3.9 percent provided by economists participating in a Bloomberg poll. A total of 77 market experts took part in this survey.
This latest revision was released after the Labor Department reported six straight months in which the nation’s employers added more than 200,000 new jobs, and an unemployment rate that generally kept moving lower.
Expansion becoming more ‘well-entrenched’
This jobs growth has helped support more robust consumer spending, and government figures have also shown gains in durable goods orders, according to Bloomberg. Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, weighed in on the latest developments in the economy.
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“The recovery is becoming more well-entrenched,” Brown, who accurately forecast the GDP growth, told the media outlet. “There is more optimism among businesses about increased demand. Ultimately, the Fed has to think seriously about the end game, though there is no need to hit the brakes any time soon.”
Fed speculation
The strength of U.S. economic reports is important to market participants involved in forex trading because their key data could provide insight into the future policy stimulus of the Federal Reserve. These actions of the central bank could in turn have a major impact on the value of the U.S. dollar relative to other currencies.
Investors were previously more concerned with the central bank’s schedule for tapering quantitative easing. However, the financial institution has most recently cut this monthly regimen to $25 billion worth of debt-based securities. Between late in 2012 and the end of last year, the central bank bought $85 billion of these financial instruments per month.
Now that the Fed has reduced these transactions, investors have turned their sights to the timeline the central bank will use to bolster its benchmark interest rates. The central bank has kept these borrowing costs near rock-bottom lows for several years.
Ukraine-Russia situation deteriorates
In addition to tuning in to the economy of the U.S., market participants have been watching the Ukraine-Russia situation to see what happens next.
Last week, Ukraine claimed that Russia was marching troops into its country, which provoked Petro Poroshenko, president of Ukraine, to assemble his security and defense council, according to Reuters. After this news, global market participants involved in forex trading started selling off the euro.
More recently, Poroshenko said in a website statement that after the latest downturn in the separatist-dominated eastern regions of Ukraine, the security council will work on additional plans, Bloomberg reported.
Yen best safe-haven, says analyst
Amid the current situation, the yen functions more effectively as a safe haven than any other currency in the Group of Ten nations, Adam Cole, global head of currency strategy at RBC Capital Markets, told Reuters.
If Cole is accurate, the yen could appreciate relative to other currencies, as Eimear Daly, head of market analysis at London-based broker Monex Europe Ltd., told Bloomberg that global markets have transitioned to risk-off mode.
“If Ukraine wants to win the war against separatists they need to do it soon, which means we are entering several months of heightened geopolitical risk,” Daly told the news source.
Expert predicts possible gain in USD/JPY
However, Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan, offered a different view when speaking with MarketWatch. He pointed out that investors have cut the size of their dollar-yen long position from late July, which could foreshadow a peak in market participants’ short covering of the Japanese currency, the media outlet reported.
Takashima also noted that once the book closing of the nation’s exporters ends, these individuals will likely place less selling pressure on the currency, the media outlet reported.
“The dollar will likely consolidate against the yen in the upper half of the ¥103 range before starting over again to test the year high of ¥105.40 as soon as early next week,” Takashima told the news source.
Market participants involved in forex trading might benefit from knowing about the recent movements in the USD/JPY, as well as the major developments that surrounded these fluctuations.
Investors taking part in this trading might benefit from staying abreast of Ukraine-Russia tensions and the strength of U.S. economic reports, as many analysts recently pointed to these developments when explaining changing prices for the USD/JPY.
The post USD/JPY Declines, amid Ukraine Concerns & Strong US GDP Figures appeared first on | HY Markets Official blog.
