Japanese Yen Rallies on Industrial Strength, Rebounding Exports

The Japanese yen is strengthening against its US counterpart on Thursday after new data found that domestic industrial output is at a four-month high and exports have returned to normal growth. The yen’s gains were likely capped on slower retail sales growth.

According to the Markit/Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI), activity expanded at the fastest pace since June, reaching to a seasonally adjusted 52.9 in October, up from 52.5 in September. This is also the 26th consecutive month of expansion – any index reading above 50 suggests growth.
The final reading for new export orders was 51.1, up from 49.8 in September, but below the market forecast of 51.7.
Joe Hayes, economist at IHS Markit, said in the report:

With PMI data for Q3 pointing to a slowdown in Japanese manufacturing sector growth momentum, a renewed acceleration at the beginning of the fourth quarter is welcome news.

A rebound in export sales is also a positive development given the backdrop of global trade woes.

New figures from the Ministry of Economy, Trade, and Industry showed that retail sales climbed for the 11th straight month in September, but it was at a slower pace from the previous month. Ministry data showed a 2.1% annual increase in retail sales, handily beating the market estimates of 1.6%.
The gains were driven by higher food, beverage, and clothing sales and rising gasoline prices.
On Wednesday, the Bank of Japan (BOJ) held a monetary policy meeting, where it left interest rates unchanged at -0.1%. It did, however, modify its economic forecasts, lowering inflation projections from 1.1% to 0.9%.
The USD/JPY currency pair tumbled 0.15% to 112.77, from an opening of 112.94, at 16:14 GMT on Thursday. The EUR/JPY rose 0.58% to 128.51, from an opening of 127.75.

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