Daily Digest Market Movers: Japanese Yen draws support from upbeat domestic data and weaker USD
- A Bank of Japan source told the Nikkei newspaper that an early rate hike leaves room to consider rolling out another increase before the end of the year, which, in turn, boosts the Japanese Yen.
- The monthly Reuters Tankan survey showed that confidence at big Japanese companies rebounded to a three-month high in March and the service-sector mood rose to a seven-month high.
- The headline manufacturers' sentiment index jumped to 10 in March from -1 the previous month, while service-sector sentiment rose to 32 during the reported month from 26 in February.
- Other data released this Thursday showed that Japan's exports grew more than expected, by the 7.8% YoY rate in February, leading to a fall in the trade deficit to ¥379.4 billion from ¥1.7 trillion.
- The flash au Jibun Bank Japan Manufacturing PMI rose to 48.2 in March from 47.2 in February, suggesting that the pace of deterioration in the factory activity was the softest in four months.
- Adding to this, the au Jibun Bank flash services PMI rose to 54.9 in March, the highest since last May, from 52.9 in February, indicating that service providers maintained a brisk pace of expansion.
- Japan's Finance Minister Shunichi Suzuki said that it is important for currencies to move in a stable manner and that he is closely watching foreign exchange moves with a high sense of urgency.
- This comes a day after the BoJ's historic move to raise the short-term interest rates for the first time since 2007 and ditch years of unconventional easing in a shift towards normalising monetary policy.
- BoJ Governor Kazuo Ueda said that the central bank will support the economy and prices by maintaining accommodative monetary conditions and medium, long-term inflation expectations are heading toward 2%.
- The Federal Reserve signalled that it remains on track for three interest rate cuts this year, easing market jitters that the central bank will lower its projection for the number of interest rate cuts in 2024 to two.
- In the post-meeting press conference, Fed Chair Jerome Powell said that the recent high inflation readings had not changed the underlying story of easing price pressures, though kept officials on a cautious footing.
- The US Dollar extends the previous day's post-FOMC pullback from a two-week high and drifts lower for the second straight day, which is seen as another factor exerting downward pressure on the USD/JPY pair.
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