Japan is the third largest
economy in the world after United States and China. It has a Gross Domestic
Product (GDP) of more than $4.82 trillion. It is also one of the most indebted
countries in the world, with a total debt of more than $12 trillion. In addition,
the country’s growth rate has slowed down. This is mostly because its large
companies that used to dominate the world have showed signs of slowdown.
Examples of these companies are the likes of Hitachi and Toshiba.
In the past few weeks, the Japanese
yen has eased significantly against the US dollar. This is because the data
released from the country has been significantly weaker than the market had
expected. Indeed, the household spending data released today was weak. The
household spending for February rose by 1.7%, which was lower than the expected
1.9%. It was lower than the 2.0% reported in February. On a MoM basis, the
spending decreased by minus 2.0%, which was lower than the expected drop of
minus 0.2%. The average cash earnings declined by -0.8%.
While the data from the US has
not been strong, the state of the Japanese economy has continued to be
worrying. For example, while the unemployment rate is at 2.5%, the wage growth
and inflation have stagnated. All this has happened when the interest rates are
below zero percent. Therefore, investors have opted to buy the USD than the low
yielding yen.
In the United States, the recent
data has also shown some weakness. This week, the employment numbers released
by ADP showed that the economy created just 120K jobs, which was lower than the
expected 175K jobs. The ISM manufacturing and non-manufacturing PMIs have been
much lower than what investors were hoping. The same is true with the economic
growth numbers and the business and consumer sentiment numbers.
The USD/JPY pair has risen
significantly from a low of 109.72 to a high of 111.80, which was reached
earlier today. This price is above the 25-day and 50-day moving averages. The
RSI has moved slightly below the overbought level of 70. Today, while the pair
could continue moving higher, it could also move lower because of the US jobs
numbers.
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