The Japanese yen weakened on Wednesday, extending this week’s pullback after last week’s strong gains.
The tone shifted at the beginning of the week after Japan’s Q4 GDP barely grew, coming in far below expectations and reinforcing concerns that momentum remains fragile.
Worse-than-expected industrial data yesterday also added to the bearish tone.
On the supportive side, Japan’s exports surged 16.8% YoY in January, the fastest pace in over three years, helped by strong chip-related demand. Additionally, optimism toward the government’s economic policies and expectations that the central bank could raise its rates later this year could support the Japanese currency over the medium term.
Still, the yen could remain under pressure against a firm dollar ahead of the FOMC minutes and key US data. In the meantime, attention turns to incoming Japanese economic data, including the inflation figures on Friday, which could affect monetary policy expectations.
