Yen exchange rate today
According to Lao Dong, on August 20, the Japanese Yen (JPY) extended its increase to the second consecutive day, dragging the USD/JPY exchange rate to a new low for the day around 147.15.
The increase comes from expectations that the Bank of Japan (BoJ) will steadfast in its policy normalization roadmap and may raise interest rates by the end of this year.
In addition, cautious sentiment in global markets continues to boost demand for the yen - a safe-haven asset.
Yen rises ahead of BoJ expectations
New data released on the same day shows a rather mixed picture of Japan's economy. core machinery orders in June increased by 3% compared to the previous month, for the first time in three months, far exceeding the forecast of a decrease of 1%.
Strong growth in the non-productive sector (up 8.8%) has offset the 8.1% decline in the manufacturing sector.
However, the trade data was disappointing: exports in July fell 2.6% year-on-year the third consecutive month of decline and the strongest decline in more than four years.
Import also decreased by 7.5%, lower than the forecast, causing the trade balance to shift to a deficit of 117.5 billion yen, instead of the expected surplus.
This information partly put pressure on the Yen, but the BoJ's tough stance helps the currency avoid deep decline.
At its July meeting, the BoJ raised its inflation forecast and affirmed that it would continue to raise interest rates if the economy and prices developed as expected.
This is a step in contrast to the US Federal Reserve (Fed), which is expected to start cutting interest rates from September, with the possibility of cutting 25 basis points twice before the end of the year.
On the other hand, the USD remains at its highest level for more than a week, thanks to expectations that the Fed will not rush to ease policy.
The US producer price index (PPI) data released last week increased the most since 2022, showing that inflationary pressures still exist. This has led investors to reduce expectations of a strong Fed rate cut in September.
