- USD/JPY remains strong above 161.00 amid outright Japanese Yen weakness.
- BoJ eyes further policy tightening on weak yen.
- Weak US manufacturing PMI weighs on the US dollar.
The USD/JPY pair is trading above 161.00 in the American session on Monday. The USD/JPY pair strengthens further as the Japanese Yen weakens amid uncertainty over the Bank of Japan policy outlook. The recent BoJ Policy Minutes showed that officials favored further policy tightening as the weak Japanese Yen is increasing inflationary pressures.
The absolute depreciation of the Japanese currency has made exports more competitive and increased import costs. Growing speculation about further rate hikes seems to be unpalatable to investors, as they expect spiralling wage growth to be the reason behind further policy tightening.
Moreover, expectations of a Japanese intervention in the currency arena are high as the Yen has weakened to a multi-decade low against the US Dollar (USD). Japan’s administration has been warning of covert intervention against rapid and unilateral moves in the currency market.
Meanwhile, the US dollar is facing pressure from weak US ISM manufacturing PMI data for June. The manufacturing PMI, which measures activities in the factory sector, unexpectedly fell to 48.5. Economists had expected factory activity to improve to 49.1 from the previous release of 48.7. A figure below the 50.0 threshold is considered a contraction in manufacturing activities.
Manufacturing inflation also eased as the prices paid index, which indicates prices paid for inputs such as raw materials and wages, expanded at a slower pace to 52.1 from estimates of 55.9 and the previous release of 57.0.
A decline in prices paid suggests an easing of price pressures. This will raise expectations of early rate cuts by the Federal Reserve (Fed).
Economic indicator
ISM manufacturing PMI
He Institute for Supply Management (ISM) The US Manufacturing Index (USMI) releases the manufacturing index, which reflects business conditions in the US manufacturing sector, taking into account expectations for future production, new orders, inventories, employment and deliveries. It is a significant indicator of overall US economic activity. A reading above 50 points indicates expansion in economic activity, while a reading below 50 points implies a decline in activity. A reading above expectations is bullish for the dollar, while a reading below consensus is bearish.
Latest Post: Mon Jul 01, 2024 14:00
Frequency: Monthly
Current: 48.5
Dear: 49.1
Previous: 48.7
Fountain: Institute for Supply Management
The Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) provides a reliable perspective on the state of the US manufacturing sector. A reading above 50 suggests that business activity expanded during the survey period and vice versa. PMIs are considered leading indicators and could signal a turn in the business cycle. Stronger than expected results generally have a positive impact on the USD. In addition to the headline PMI, the employment index and prices paid index numbers are closely watched as they shed light on the labor market and inflation.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
