Japanese Yen Falls Following Dovish Kuroda Statement

The Japanese Yen was down against its global peers after an interview by Bank of Japan Governor, Hurohiko Kuroda. In the interview, he said that officials were concerned with the low inflation rate, which could delay the normalization process. Early this year, he had predicted that the bank would start winding up the stimulus package in April next year. The yen was also pulled down by the manufacturing PMI number that missed analysts’ forecast. The number showed that the PMI was at 53.3 which was higher than last month’s 53.1 but lower than analysts’ forecast of 53.4.

The yen was also weighed down by reports that North Korea was ready to end all nuclear test programs. The yen is viewed by investors as a safe haven. This is partly because of the huge US treasuries Japan has accumulated over the years. Today, Japan holds more than $4 trillion of US debt. On Friday, BOJ will release the interest rate decision and a formal statement on the decision.

The dollar was higher after the Wall Street Journal reported that Treasury Secretary, Steve Mnuchin was planning a trip to China. During the trip, he will meet with the country’s leaders including President, Xi Jinping. The trip is intended to help ease trade tensions between the two countries. The US will ask China to open up its market by removing the barriers that exist for American companies and products.

The euro was little moved against the UK pound, but lower against the US dollar after Germany released the manufacturing PMI numbers. The data showed the PMI at 58.1. This was lower than last month’s 58.2 but higher than what analysts were expecting. Traders are expecting a PMI of 57.6. Traders are also looking forward to a series of talks between European leaders with US leaders. Emmanuel Macron will arrive in Washington today while Angela Merkel of Germany will arrive on Friday.

EUR/USD

The EUR/USD pair started the month by rising from a low of 1.2210. It then rose to a monthly high of 1.2413. In the past few days, the pair has given up on the earlier gains and is closing in on the monthly low. The gains on the dollar can be attributed to the easing of tensions on trade and the hope of a deal with North Korea. The pair could continue moving lower until it reaches the monthly low.

USD/JPY

The USD/JPY pair continued the rally started in late March to reach a monthly high of 108.33. Today’s rally was as a result of a dovish statement from the Bank of Japan Governor, Hurohiko Kuroda. The pair will likely be volatile this week as investors wait for the interest rate decision and the official statement from the BOJ on Friday.

EUR/GBP

The EUR/GBP started the year by rising to a high of 0.8968. The pair then started dropping, reaching a YTD low of 0.8618 mid this month. Since then, the pair has moved significantly higher. In the past five days, it has gained by almost 2%, reaching the 50% Fibonacci Retracement level. The pair is now trading at 0.8763. There is a likelihood that the pair could test the 0.8852 level, which is the 61.8% retracement level.