Japanese Yen Edges Despite Dismal Current Account

Japanese Yen Edges Despite Dismal Current Account

USD/JPY has recorded small gains in the Monday session. In the North American session, USD/JPY is trading at 107.10, up 0.15% on the day. On the release front, Japan’s current account dropped sharply in February to JPY 1.02 trillion, down from 2.02 trillion in January. The reading fell short of the estimate of JPY 1.39 trillion. Japanese Consumer Confidence remains weak, and was unchanged at 44.3, missing the estimate of 44.6 points. Another consumer indicator, Economy Watchers Sentiment, rose to 48.9, above the forecast of 48.1 points. On Tuesday, the US releases PPI, a key inflation indicator.

US nonfarm payrolls, one of the most critical economic reports, was a major disappointment on Friday. The economy added just 103 thousand jobs, well off the forecast of 188 thousand. Still, the markets do not appear overly concerned, as payroll reports often sag in March. On a more positive note, wage growth improved to 0.3%, up from 0.1% a month earlier. This release matched the estimate. The improvement is likely to reinforce sentiment that the Fed could press the rate trigger four times in 2018, which could push the US dollar higher.

Japanese Prime Minister Shinzo Abe will meet with Prime Minister Trump later this month in Florida, and Japanese officials are bracing for what could be difficult trade talks. Trump signed a free-trade deal with South Korea in March, and the agreement included a side deal to prevent currency devaluation, and the US could demand similar provisions with the Abe government, which has adopted an ultra-accommodative monetary policy that has kept the yen at low levels. Trump may also demand a bilateral free-trade agreement between the two countries, rather than the multilateral approach favored by Tokyo.

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