USD/JPY stabilises close to one-week highs, as strong data, vaccine hopes hurt demand

USD/JPY currently trades just below the 104.50 mark, having put in an impressive more than 60 pip rally from earlier sub-104.00 lows. The pair current  |  23/11/2020 20:59
  • Since spiking to the upside in wake of strong US data earlier in the session, USD/JPY is consolidating close to 104.50.
  • Further vaccine optimism following AstraZeneca’s latest update is further hurting demand for the safe-haven currency.

USD/JPY currently trades just below the 104.50 mark, having put in an impressive more than 60 pip rally from earlier sub-104.00 lows. The pair currently trades 0.7% higher, making JPY far and away the worst-performing currency in the G10 on Monday.

JPY suffers amid strong global data, vaccine optimism

The bulk of the move higher in USD/JPY on Monday came in wake of US Markit PMI numbers, which were released at 14:45GMT and showed the US manufacturing and services sectors holding up significantly better than expected in November, despite the fact that much of the country has been returning to some form of lockdown restriction over the past few weeks.

Eurozone and UK PMI data in the European morning was not quite so good, with services taking a notable hit, but the manufacturing sector generally held up much better than expected, further boosting global economic optimism.

Whether this economic strength can be maintained over the coming months as winter (and the height of flu season) approaches, but for now things are holding up better than expected, reducing the demand for safe-haven JPY.

Further reducing the demand for JPYs today was another vaccine update, this time from AstraZeneca; the vaccine maker announced that its candidate had 70% efficacy, and the vaccine can be easily distributed given that it can be stored for six-months at refrigerator temperature.

Elsewhere, the news that former FOMC Chair Yellen has been picked for the role of Treasury Secretary by President-elect Joe Biden has spurred some upside in stocks (likely they see government finances in “good hands” given Yellen’s extensive experience at the highest levels of leadership), but has done little to shift USD/JPY.

Meanwhile, there have been a few Fed speakers on the wires (Evans and Barkin), though they have not added much new regarding the possibility for more stimulus; the most interesting comments came from Evans, who sees rates staying lower for longer in absence of further fiscal stimulus from the US government.

Looking ahead, the pair is likely to continue to trade as a function of risk sentiment and machinations in the demand for USD. BoJ Governor Kuroda will be speaking at 12:05GMT on Tuesday, however, which could be of interest.

USD/JPY Key levels to watch

 

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