Yen under pressure amidst speculation of GDP revision
March 6th - With the Bank of Japan’s monetary policy meeting scheduled for later this week, expect attention to focus on the Yen in the days ahead. The market may have already priced in the fact that the country’s ultra-lax policy will be coming to an end, but uncertainty over just how quickly rates will climb from here and mounting belief that the US economy is starting to look more robust could keep the Yen under pressure – especially against the dollar – in the near term. A survey from Japan’s ministry of finance has suggested that updated Q4 2005 GDP figures – due for release next Monday – may face a downward revision, whilst US numbers due for release in the coming days will be under increased scrutiny in case they should add weight to the dollar in the near term. Most critical of these is set to be Thursday’s non-farm payrolls for February – winter storms are likely to have something of an impact here but signs of economic expansion are still expected, especially after last Friday’s buoyant ISM non-manufacturing reading. As has become normal now, any suggestion that the Fed will have to hike interest rates later in the month to keep inflation in check can be expected to buoy the dollar further – USD JPY has already tested 117 after last week’s dip as low as 115.50 and although a return to last month’s highs around 119 may be unlikely unless we see some surprise data, further dollar appreciation could well be forthcoming.
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