The USD/JPY fell on Tuesday, Nov. 25, amid the latest U.S. consumer confidence data and the minutes for the most recent Bank of Japan meeting.
USD/JPY drops
The currency pair dropped 0.3 percent to 117.91, according to The Wall Street Journal. One major development that coincided with this downward movement was news that the Conference Board’s index of consumer confidence fell to 88.7, compared to 94.1 in October. Lynn Franco, director of Economic Indicators at The Conference Board, weighed in on the situation in a statement.
“Consumer confidence retreated in November, primarily due to reduced optimism in the short-term outlook,” she said. “Consumers were somewhat less positive about current business conditions and the present state of the job market; moreover, their optimism in the short-term outlook in both areas has waned. However, income expectations were virtually unchanged and gas prices remain low, which should help boost holiday sales.”
US consumer confidence data
The falling consumer confidence figures provided a contrast to economic reports painting a picture of improving labour market conditions, The Wall Street Journal reported. Additional data has supported the idea that business conditions are getting better in the world’s largest economy, and this development has helped prop up the greenback. However, if the recent consumer confidence report is a sign that sentiment that is falling as the holidays approach, the situation might not bode well for the broader economy.
“With the year-end in sight, the dollar will be vulnerable to profit-taking, given the breadth of its outperformance this year,” Joe Manimbo, who works for Western Union as a senior market analyst, told the news source. “The consumer confidence report provided just the catalyst.”
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Impact of BOJ minutes
While these concerns provided headwinds for the U.S. dollar, the BOJ minutes created tailwinds for the yen, Reuters reported. Market participants have been scrutinizing these statements to get a better sense of whether the financial institution will increase up its bond purchases, and some central bank officials expressed their concerns that intensifying this stimulus could make it look like the BOJ was financing the government deficit.
As a result, the minutes provided by the central bank contrasted with the organization’s announcement last month that it would increase its annual debt purchases to 80 trillion yen ($679 billion), from the previous level of 50 trillion yen ($424 billion), according to the news source.
After this situation, the yen plunged to a seven-year low versus the greenback amid speculation the BOJ would decide to use additional stimulus, the media outlet reported. After this downward movement, some analysts warned the sharp drop might have been an overreaction.
Investors interested in forex trading might benefit from knowing about downward movement the USD/JPY experienced on Nov. 25, as well as the developments that were credited with causing this depreciation. Keeping a close eye on such matters might help market participants make better-informed decisions.
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