Yen gains after upbeat Japan GDP pares stimulus bets

Reuters Tokyo | Updated on January 20, 2018 Published on May 18, 2016


The yen gained against the dollar and the euro on Wednesday, after data showed Japan’s economy expanded at the fastest pace in a year in the first quarter and some investors pared bets on further stimulus.

Japan’s economy expanded by an annualised 1.7 per cent in January-March, easily beating the median market forecast for a 0.2 per cent increase and rebounding from a 1.7 per cent contraction in the previous quarter, the Cabinet Office data showed.

“The yen strengthened a bit because growth was stronger than many had expected,” said Ayako Sera, market strategist at Sumitomo Trust and Banking. “But looking at the details, there were still some concerning areas, including capital spending.”

Monetary stimulus

Many analysts said Japan narrowly dodged recession, defined as two straight quarters of contraction, because of the boost from the extra day in a leap year. The Bank of Japan chose to hold policy steady at its last meeting, but many still believe it will muster additional easing steps as early as next month.

The dollar notched its session high of 109.27 yen just ahead of the GDP release, and subsequently fell as low as 108.73. It was last down 0.3 per cent at 108.84.

Dollar vs yen

Overnight, the US currency briefly spiked to 109.65 yen, its highest since April 28 after data showed US consumer prices recorded their biggest increase in more than three years in April.

The greenback, however, drifted off the high as US equities flagged and nudged down Treasury bond yields.

The euro slipped 0.3 per cent against the yen to 123.11.

Against the dollar, the euro was slightly lower at $1.1309 after closing little changed against the dollar overnight.

The pound slipped 0.2 per cent to $1.4451. Sterling spiked to $1.4524 overnight after a pair of polls showing the “In” camp well ahead in the run-up to Britain’s June 23 referendum on European Union membership.

The gains were later trimmed by lower-than-expected UK inflation data.

The Australian dollar slipped 0.3 per cent to $0.7302, giving back some of the previous session’s rally on minutes of the Reserve Bank of Australia’s (RBA) May policy meeting, which encouraged markets to pare back the chances of a cut in interest rates.

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Published on May 18, 2016
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