The Japanese yen gained against the US dollar during the Asian session yesterday following the release of robust core machinery orders data. However, the greenback bounced back during the US session following the report of three-month high JOLTS job openings data. Overall, the USD/JPY pair traded in a narrow range of between 103.90 and 104.07.
Japan’s Cabinet Office reported that core machinery orders, which reflects capital spending in the forthcoming 6 to 9 months, increased 17.1% m-o-m in October, following a 4.4% decline in the earlier month and greater than the 2.8% growth anticipated by economists surveyed by Reuters. The reported figure represents the largest m-o-m increase since the organization started publishing data in 2005.
On a y-o-y basis, core machinery orders increased 2.8% in October, surpassing a 11.3% drop expected by economists. Core machinery orders do not include data pertaining to ships and electricity.
The surge in core orders indicates a slight rebound in corporate spending, a requisite to expedite the rebound in the world’s third-largest economy.
Commenting on the overall capital spending scenario, Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank, said, “The global economy is in quite a weak state aside from China, so it’s hard to imagine sharp increases in spending aimed at supporting exports. Domestic production remains in a relatively healthy trend because of a decrease in inventories in April and May.”
Manufacturing orders increased 11.4%, aided by non-ferrous metals, as well as a huge order of ¥7 billion (~$67.22 million). Also, non-manufacturers posted growth of 13.4%, driven by insurance and finance sub-sectors.
The government upwardly revised its evaluation on machinery orders, stating that the decline had halted.
The cabinet also endorsed a new $708 billion fiscal stimulus package to support the economic activity. The third package involves setting aside $385 billion for straightforward fiscal outlays, while also aiming for investment in fresh growth zones such as sustainable initiatives and digital advancement.
According to the Bank of Japan, M2 Money Stock increased 9.1% y-o-y in November, following an increase of 9% in the earlier month. Economists had anticipated M2 Money Stock to increase 8.9% for the reported period. M2 Money Stock reflects the change in the aggregate quantity of local currency deposited in banks and in circulation.
According to the data provided by the Japan Machine Tool Builders’ Association, preliminary machine tool orders rose by 8% y-o-y in November, compared with a decline of -6% in the earlier month. The reported reading reflected the first increase since September 2018.
In the US, as per data provided by the Census Bureau, wholesale inventories increased 1.1% m-o-m in October. The reported final estimate was a notch higher than the 0.9% rise reported in the initial estimates. Economists did not anticipate any change in the final data.
According to the Job Openings Bureau of Labor Statistics (JOLTS), excluding the farm sector, the number of job openings in the US was 6.65 million in October, compared with 6.49 million in the earlier month and greater than the 6.30 million job openings anticipated by economists.
Job openings rate (as a percentage of total employment plus openings) increased by 4.5% in October, from 4.4% in September. The pace of hiring was 4.1% in October, compared with 4.2% in the previous month. During the reported period, 3.092 million people quit their job, reflecting a quit rate of 2.2%. The separation rate was 3.6% in October, compared with 3.4% in September.
The positive data from both the US and Japan is expected to keep the USD/JPY pair range-bound with a slight bullish bias.
The historical price chart indicates that the USD/JPY pair is ascending after testing the supply at 103.90. The next resistance is anticipated only near 104.30. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic oscillator is in the bullish region. Therefore, we are anticipating the currency pair to rally in the days ahead.
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