The yen strengthened across the board in early deals on Wednesday as the Bank of Japan began its 2-day monetary policy meeting today. Downbeat trade data from China also increased demand for the safe-haven yen.
Risk-aversion intensified as the International Monetary Fund on Wednesday slashed its global growth forecast for a fifth consecutive time and warned that China and other emerging economies face new risks “including the possibility of a longer growth slowdown”.
Data out of China released today showed that exports and imports both unexpectedly declined in June, indicating weak global demand. China posted a merchandise trade surplus of $27.1 billion in June, slightly below expectations for a surplus of $27.8 billion following the $20.42 billion surplus in May.
Investors are now looking ahead to the U.S. FOMC minutes of its June policy meeting. The minutes will be closely watched by investors as the accompanying press conference of the June meeting reaffirmed the likelihood of scaling back the size of Fed’s stimulus program. Fed Chairman Ben Bernanke is also due to speak on economic policy at a conference.
In economic news, consumer confidence in Japan eased to a seasonally adjusted 44.3 in June from 45.7 in May, the Cabinet Office revealed in its result of a monthly survey. A reading below 50 suggested pessimists outnumbered optimists. Economists predicted the headline figure to come in at 45.6 in the month.
Japan’s domestic corporate goods price index was up 0.1 percent to 101.6 on month in June, the Bank of Japan said on Wednesday, beating forecasts for a flat reading, which would have been unchanged following a revision from 0.1 percent for May.
On a yearly basis, prices jumped 1.2 percent, matching forecasts and up from the downwardly revised 0.5 percent gain in the previous month (originally 0.6 percent).
Japan’s tertiary industry activity index was up a seasonally adjusted 1.2 percent in May compared to the previous month, the Ministry of Economy, Trade and Industry said today, standing at 100.8. That topped forecasts for a gain of 0.7 percent following the flat reading in April.
The yen rose above the 100.0 level against the US dollar, rising to a 6-day high of 99.77 from a session’s low of 101.20. The yen also jumped to a 2-week high of 127.99 against the euro.
The yen advanced to 103.08 against the Swiss franc, its strongest level since June 18. Against the pound, the Japanese currency climbed to a 3-week high of 148.76.
The yen also edged higher against the resource-linked currencies on Wednesday, hitting a 5-day high of 94.96 against the Canadian dollar and session’s highs of 92.90 against the Australian dollar and 78.41 against the New Zealand dollar.