RTTNews - Wednesday in Asia, the yen tumbled against its major counterparts after reports showed that Japan's trade surplus declined and the nation's corporate service prices fell at a record pace in the month of May, casting doubt on the nation's growth prospects as the economy struggles to emerge from its worst postwar recession.
The yen plummeted to an 8-day low against the franc, 5-day low against the euro, 2-day lows against the pound, the aussie and the kiwi. The yen also showed modest weakness against the US and Canadian dollars.
Japan's Finance Ministry said that Japan posted a trade surplus of 299.8 billion yen, a decrease of 12.% on year. Most experts has forecast a surplus of 214.6 billion yen.
Exports in May fell 40.9% from a year earlier, the eighth straight month of decline, on weak overseas demand for cars, steel and electronic parts, the data showed. Imports dropped 42.4% in May, marking the seventh straight month of decrease.
Japan's corporate service prices fell at a record pace in May as companies reduced spending, adding to evidence the economy is sliding back into deflation.
The corporate services price index plunged 3% year on year to 92.4 in May, the sharpest decline since the data began to be compiled in 1985, the Bank of Japan said today.
This, the eighth straight month of decline, was attributed to lower crude oil prices and overall sluggish demand. The index dropped 0.3% from April, down for the second straight month.
Japan's deepest postwar recession has eroded corporate earnings, forcing companies to spend less and cut wages. The risk is that the decline in income for businesses and consumers will cause demand to weaken even further, leading to deflation that could smother an economic recovery.
The yen fell to a 5-day low of 134.72 against the euro during Asian deals on Wednesday. The next downside target level for the Japanese currency is seen at 135.2.
The yen surged up to a new multi-week high of 131.46 against the euro in Asian deals yesterday as the stock markets plunged on renewed concerns about the global economy. But the yen pared its gains after a report showed in early European deals that the German consumer confidence rose more than expected in July. The yen remained lower in the New York session and closed the day's trading at 134.06 against the euro.
In Asian trading on Wednesday, the yen slipped to a 2-day low of 157.47 against the pound. If the yen weakens further, it may find support around the 159.4 level. At yesterday's close, the pound-yen pair was quoted at 156.74.
The yen has depreciated 2% against the pound after it reached a 3-week high of 154.13 yesterday.
The yen that closed yesterday's trading at 89.29 against the Swiss franc dropped to 89.69 in Asian deals on Wednesday. This set the lowest point for the yen since June 16. On the downside, 91.5 is seen as the next target level for the Japanese currency.
The yen rose to a 26-day high of 87.39 against the franc at 2:00 am ET yesterday. But the yen weakened thereafter and it has lost 3% thus far.
During Asian deals on Wednesday, the yen slumped to a 2-day low of 61.30 against the NZ dollar and 76.12 against the Aussie. If the yen falls further, it may likely target 62.3 against the kiwi and 78.4 against the Aussie. The kiwi-yen and the aussie-yen pairs were worth 60.91 and 75.58, respectively at yesterday's close.
The New Zealand dollar climbed after a report showed that consumer confidence in New Zealand rose in the second quarter to an 18-month high.
According to a survey by Westpac McDermott Miller, New Zealand's consumer confidence index climbed to 106 in the second quarter from 96 in the first quarter. The index reached a 18-month high in the second quarter and was also much higher than the low reading of 81.7 seen in the second quarter of last year.
The yen tumbled to 83.37 against the Canadian dollar in Asian trading on Wednesday. The next downside target level for the yen is seen at 83.6. At yesterday's close, the loonie-yen pair was quoted at 82.85.
In Asian trading on Wednesday, the yen edged down to 95.62 against the U.S. dollar. This may be compared to Tuesday' s closing value of 95.23. On the downside, 95.9 is seen as the next likely target for the Japanese currency.
In the upcoming European session, the Italian consumer confidence index for June, retail sales for April and the Euro-zone April current account reports are expected.
Across the Atlantic, the U.S., Commerce Department is set to release its durable goods orders report at 8:30 am ET. Economists look forward to a 0.9% decline in durable goods orders for May.
The Commerce Department is also due to release its new home sales report for May at 10 am ET. The consensus estimate calls for an increase in new homes sales to 360,000.
The Federal Reserve Open Market Committee began its two-day policy meeting yesterday and will make an announcement at 2:15 pm ET today.
At its April meeting, the Fed maintained its key fed funds target rate unchanged at a range of 0%-0.25%. The FOMC noted that the economy continued to contract, with the pace of contraction slowing somewhat. Despite the stabilization in consumer spending, the committee noted that spending continued to be constrained by job losses, lower housing wealth and tight credit.
Overall, the central bank is of the view that economic activity is likely to remain weak for a time. That said, the committee expects sustained economic growth will resume gradually due to policy actions, fiscal and monetary stimulus and market forces. Additionally, the fed suggested that inflation may remain below rates that are consistent with economic growth and price stability.
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