The Japanese yen is steady on Wednesday. In the North American session, USD/JPY is trading at 151.60 up 0.02%. Earlier today, the yen came within a whisker of the 152 line, climbing as high as 151.95.
Japanese services PMI expands
Japan’s services PMI improved to 54.1 in March, revised lower from 54.9 in the preliminary estimate. Still, this beat the February reading of 52.9 and marked a seven-month high. The services sector has now expanded for 19 straight months and has been the driver of an improving Japanese economy, as manufacturing has been struggling. With the Covid-19 pandemic finally in the rear mirror, inbound tourism has risen and stronger domestic demand has boosted business activity. The solid PMI report comes on the heels of the Bank of Japan’s Tankan survey, which indicated that confidence in the services sector surged to a 33-year high in the first quarter.
The Japanese yen continues to trade around 34-year lows against the US dollar, raising concerns that Japan’s Ministry of Finance (MOF) could intervene in the currency markets in order to prop up the Japanese currency. The MOF has so far limited its response to verbal intervention, warning that it will take “decisive steps” to stop the yen’s slide and BoJ Governor Ueda said last week that the central bank is closely watching the yen’s movement.
The Bank of Japan made a major policy shift at the March meeting when it lifted rates out of negative territory, but the markets aren’t expecting any further tightening before the fall. The BoJ stressed at the meeting that monetary policy would remain accommodative for the time being, a signal that it is no rush to raise rates.
In the US, today’s ADP employment report was stronger than expected, with a gain of 184,000 in March. This beat February’s upwardly revised reading of 155,000 and was higher than the market estimate of 148,000. The ADP report isn’t considered a reliable precursor to NFP, but investors nonetheless attach importance to the release, which comes out only two days prior to nonfarm payrolls. The markets are expecting nonfarm payrolls to drop to 200,000 in March, compared to 275,000 in February.
USD/JPY Technical
- USD/JPY tested resistance at 151.87 earlier. Above, there is resistance at 152.39
- There is support at 151.45 and 150.93
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