The Japanese Yen (JPY) is on track to recover from its lowest level since late July against the US Dollar as investors step up buying, according to FXStreet.
A big support factor for the JPY is warnings from Japanese authorities about intervening in the foreign exchange market.
Japan's Chief Cabinet Secretary Yoshimasa Hayashi stressed that the government is closely monitoring the foreign exchange market. Japan's Vice Finance Minister in charge of foreign exchange, Atsushi Mimura, also said he was ready to intervene if the market became too volatile. Finance Minister Katsunobu Kato also said he would monitor the impact of President-elect Trump's policies on the Japanese economy.
Data from Japan's Ministry of Finance shows that Japan spent 5.53 trillion yen intervening in the currency market between late June and late July.
In addition, falling US Treasury yields also helped the JPY – a low-interest-bearing currency – gain more appeal.
However, data on Japan's economy was not very positive, as real wages and household spending continued to fall for the second consecutive month in September.
Official data released Friday showed Japan’s household spending fell for a second straight month, falling 1.3 percent in September and 1.1 percent from a year earlier, while real wages, adjusted for inflation, fell for a second straight month.
This dampens the inflation outlook and could force the Bank of Japan (BoJ) to think twice about raising interest rates. Coupled with the domestic political backdrop and bullish market sentiment, the JPY could see its appeal limited. Meanwhile, a rebound in the US dollar could dampen the JPY pair's gains.
