The Japanese yen (JPY) slipped against the US dollar (USD) on Tuesday. This movement seemed to be influenced by speculation around intervention in Tokyo and a weakening US dollar, following some disappointing economic data. As of the latest update, the USD/JPY pair was down nearly 0.50% and trading around 156.05, pulling back from its recent highs.
The dollar faced considerable selling pressure after the producer price index (PPI) for September was weaker than expected, along with retail sales revealing a slowdown in inflation and consumer demand.
The composite PPI rose 0.3% month-on-month, which was in line with expectations. However, the core index only increased by 0.2%, falling short of the anticipated 0.3%, and its year-on-year growth slowed from 2.9% to 2.6%.
Retail sales data also disappointed. Major retail sales saw a month-on-month increase of just 0.2%, missing a 0.4% forecast and a decline from the 0.6% rise in August. Year-on-year, retail sales in September grew by 4.3%, down from approximately 5.0% in August.
Crucially, the retail sales management metric, which directly impacts GDP figures, fell by 0.1% in September, contrary to the expected 0.3% gain, and also dropped from August’s increase of 0.6%. Excluding automobiles, retail sales went up by only 0.3% month-on-month, again lower than the expected 0.4% and down from August’s 0.6%.
Signs from the labor market suggest further weakness, with the four-week average of ADP employment changes dropping significantly from -2.5k to -13.5k, indicating a slowdown in job creation.
Market expectations of a rate cut have been bolstered by recent dovish comments from key Federal Reserve officials, hinting that there might be room for easing, and the latest data has led to increased speculation about potential rate cuts in December.
In Japan, remarks from Finance Minister Katayama and other officials regarding potential intervention helped the yen regain some strength. They expressed concern about the quick fluctuations in exchange rates and indicated a readiness to act if necessary.
That said, ongoing fiscal worries tied to the government’s extensive economic stimulus package, paired with skepticism about any immediate interest rate hikes from the Bank of Japan (BOJ), continue to cloud the long-term outlook for the yen, limiting its chances for sustained gains.
