Skip to content USDJPY Fundamental Analysis – 16-August-2024
The Japanese yen fell beyond $147.9 (USD/JPY), reaching its lowest point in two weeks. This decline comes as the US dollar strengthened, driven by unexpectedly strong economic data from the United States.
The positive numbers eased worries about a potential recession in the world’s largest economy, leading to more confidence in the dollar and putting pressure on the yen.
Political Uncertainty Adds Pressure to the Yen
Adding to the yen’s struggles, political uncertainties in Japan have contributed to its depreciation. Recent reports suggest that Prime Minister Fumio Kishida may not run for re-election as his party’s leader in September, ending his time as prime minister.
Such instability in leadership can create uncertainty in financial markets, weakening investor confidence in Japan’s currency.
Japan’s Economic Growth Outperforms Expectations
Despite the yen’s drop, Japan’s economy delivered positive news earlier this week. Data revealed that Japan’s GDP grew by 0.8% in the second quarter of this year, recovering from a 0.6% decline in the previous quarter.
This growth exceeded market predictions of 0.5%, showcasing resilience in Japan’s economy. On an annual basis, the economy expanded by 3.1% in Q2, a notable improvement from the 2.3% decline in Q1 and better than the expected 2.1% growth.
Monetary Policy and Future Rate Hike Speculations
Meanwhile, investors closely monitor the Bank of Japan (BoJ) and its next move on interest rates. The central bank is walking a tightrope, trying to manage heightened market volatility while balancing the timing of potential rate hikes.
Market participants continue to speculate when the BoJ might take action, as any adjustments could significantly impact the yen and the broader Japanese economy.
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