Japanese data disappoint and sends Yen lower, while the Greenback consolidates more broadly

In subdued foreign exchange turnover, the dollar enjoys a firmer bias against most G10 currencies amid on broadly consolidative tone. The US markets are closed for President’s Day, while Chinese markets are closed for the week to celebrate the Lunar New Year. Disappointing Japanese data, including Q4 GDP and December industrial output weighed on the yen, which is off about 0.5% but the greenback has not risen above the high set at the end of last week (~JPY153.65). Despite the lack of mainland guidance, the market took the offshore yuan higher in its largest advance in a couple of weeks. 

While Iranian officials discuss technical issues with the UN nuclear regulators, and the Revolutionary Guard holds military drill in the Strait of Hormuz amid the US show of military force in the region, a US-Iranian talks are proceeding. Oil prices are largely steady, and gold is a little heavier. 

Prices  

G10

The euro traded quietly even if choppily ahead of the weekend. A break of last Wednesday’s range (~$1.1835-$1.1925) may signal the direction of the next 0.5-1.0-cent move. Our bias is for a higher breakout. It is in about a fifth of a cent range today below $1.1880. 

The dollar held slightly below Thursday’s high (~JPY153.75) ahead of the weekend and recorded session low near JPY152.60 near midday in NY. Support is seen in the JPY152.00-20 area. The greenback has not traded below JPY152 since late October. Disappointing data weighed on the yen, and the greenback recovered to almost JPY153.65. Initial resistance may be around JPY153.75, and then JPY154.35.

Sterling recovered from a four-day low early Friday (~$1.3590) and reached almost $1.3660 in North American turnover. It could not get much above there today but has not spent much time below $1.3635. Last week’s high was a little below $1.3715, but it may require a move above $1.3730 to signal a return to the highs (~$1.3870).

The US dollar’s bounce off last Wednesday’s low against the Canadian dollar (~CAD1.3505) stalled near CAD1.3640, the (61.8%) retracement of the decline since the February 6 high (~CAD1.3725). It pulled back to slightly below CAD1.3600. It is trading quietly today between roughly CAD1.3605 and CAD1.3625. Nearby support is seen in the CAD1.3555-75 area. 

The Australian dollar peaked last Thursday a few hundredths of a cent below $0.7150. It was sold to about $0.7045 before the weekend and recovered to around $0.7085. It traded between about $0.7055 and almost $0.7100 today. A significant high does not appear in place, but a break of $0.7000-$0.7020 would require a reassessment, as momentum indicators are stretched. 

EM

The dollar as confined to an inside day against the Mexican peso ahead of the weekend. It posted the lowest settlement of the month, below MXN17.15. A shelf has been forged in the MXN17.10-12 area. It is trading quietly but softly within last Friday’s range. It could be the first session since 2024 that it does not trade above MXN17.20. 

Mainland Chinese markets are closed for the New Year holiday. The markets reopen on February 24. We expected the holiday to deter large moves in the offshore yuan, given the uncertainty of the extent of Beijing’s campaign for a gradually stronger yuan. However, today, the dollar fell to almost CNH6.8800 after settling last week near CNH6.9010. Hong Kong markets celebrate the holiday starting tomorrow and re-open Friday. 

The Indian rupee continues to trade softly but remains within the range set on February 6 when the dollar carved a range of INR90.1750 and INR90.8550. The rupee was resilient in the face of the central bank tightened broker lending rules. Also, the January unemployment rate rose, and the trade balance deteriorated sharply. 

Other Markets

Asia Pacific equities were mixed. Japanese equities pulled back, but Hong Kong, including mainland listings, and Taiwan and Australian equities advanced. The Stoxx 600 in Europe is snapping a two-day decline and is up a little more than 0.25% in late morning turnover. US index futures are trading firmer, but the cash markets are closed today. 

Asia-Pacific benchmark 10-year yields were softer today. Although Japan’s 10-year yield slipped below 2.20%, the 30- and 40-year yields rose. European yields are trading slightly firmer. Recall that last week, the US 10-year yield tumbled nearly 16 bp to a smidgeon below 4.05%, a two-month low. 

Gold has traded in around $35 on both sides of the $5000-mark today. The roughly $4860-$5140 range has confined the price action for more than a week. Silver is trading within the pre-weekend range (~$74.0-$79.35). 

March WTI traded at an eight-day low before the weekend, near $62.15 and settled around $62.50. It reached $63.30 today but is little changed near midday in Europe. 

Data

Canada reports January housing starts, and December manufacturing starts. Neither captures the market’s imagination. For the record, Canadian housing starts rose by about 5.5% last year after increasing less than 1% in 2024. For the sake of comparison, the US housing start data was interrupted by the government shutdown, but through October, they were practically flat from the first ten months of 2024. 

The eurozone’s December aggregate industrial production tumbled by 1.4% after a revised 0.3% rise in November (initially 0.%). That puts it up about 1.2% year-over-year. The first annual increase in three years has been helped by infrastructure and defense initiatives. 

Japan estimated that the world’s third-largest economy grew by a disappointing 0.1% in Q4 25 after contracting by a revised 0.7% (initially -0.6%) in Q3 25. The GDP deflator eased to 3.4% from a revised 3.5% (initially 3.4%). Private consumption slowed (0.1% vs. 0.4%, initially 0.2%), but business spending rose by 0.2% (after falling by 0.3% in Q3 (initially -0.2%). Net exports were flat after contracting a revised 0.3% (initially -0.2%) in Q3. The year ended on a soft note with declines in December industrial output (-0.1%) and an anticipated decline in tertiary (services) industry (-0.3%), due tomorrow. The swaps market has two hikes discounted for this year, down from three hikes briefly late last month. There is a little more than 65% chance of the first hike by the end of April, down from nearly 80% a week ago. 

India reported January unemployment rose to 5.0% from 4.8%. The January merchandise trade deficit swelled to $34.7 bln from $25.0 bln in December. Exports rose 0.6% from a year ago (1.9% in December), while imports surged 19.2% (8.8% in December).