Yen Slides Ahead Of BOJ Monetary Policy Meeting

(RTTNews) - The Japanese yen weakened against other major currencies in the Asian session on Thursday, as traders' focus is largely on the Bank of Japan's monetary policy meeting due on Friday.

Traders also expect the Bank of Japan (BoJ)to maintain its ultra-loose policy stance to support local economic growth.

Investor sentiment reacted positively to the U.S. Fed pausing its interest rate hikes following ten consecutive rate hikes, while also forecasting additional increases before the end of the year.

Meanwhile, the European Central Bank is expected to raise interest rates by 25 basis points later in the day despite deepening fears of a recession in Europe.

In economic news, Japan posted a seasonally adjusted merchandise trade deficit of 1,362.5 billion yen in May, the Ministry of Finance said on Thursday. That missed expectations for a shortfall of 1,331.9 billion following the 432.3 billion yen deficit in April.

Exports were up 0.6 percent on year to 7,292.6 billion yen, exceeding forecasts for a 0.8 percent decline following the 2.6 percent gain in the previous month. Imports dropped an annual 9.9 percent to 8,665.1 billion yen versus expectations for a decline of 10.3 percent after slipping 2.3 percent a month earlier.

Meanwhile, the Cabinet Office said on Thursday that the value of core machine orders in Japan was up a seasonally adjusted 5.5 percent on month in April, at 900.0 billion yen. That beat expectations for a gain of 3.0 percent following the 3.9 percent decline in March.

On a yearly basis, core machine orders slumped 5.9 percent, but that also exceeded expectations for a drop of 8.0 percent after sinking 3.5 percent in the previous month. For the second quarter of 2023, core machine orders are seen higher by 4.6 percent on quarter, and lower by 1.6 percent on year.

The safe-haven yen started weakening against its major rivals from 12th June onwards.

In the Asian trading today, the yen slid to 152.77 against the euro for the first time since September 2008. The yen depreciated to 156.35 against the Swiss franc, its lowest level since December 1979. At yesterday's close, the yen was trading at 151.61 against the euro and 155.36 against the Swiss franc. If the yen extends its downtrend, it is likely to find support around 155.00 against the euro and 160.00 against the franc.

Against the pound, the yen dropped to 178.59 for the first time since 31st december 2015. The pair was trading at 177.29 at yesterday's close. On the downside, 181.00 is seen as the next support level for the yen.

The yen slipped to nearly a 7-month low of 141.33 against the U.S. dollar, from yesterday's closing value of 140.05. The next support level for the yen is seen around the 148.00 area.

Against the Australia, the New Zealand and the Canadian dollars, the yen declined to nearly a 9-month low of 96.07, nearly a 4-week low of 87.22 and nearly a 7-month low of 105.74 from yesterday's closing quotes of 95.15, 86.95 and 105.09, respectively. The yen may test support around 99.00 against the aussie, 89.00 against the kiwi and 108.00 against the loonie.

Looking ahead, Switzerland producer and import prices for May is due to be released in the pre-European session at 2:30 am ET.

In the European session, Eurozone trade balance for April is slated for release.

In the New York session, Canada housing starts for May and manufacturing sales data for April, U.S. retail sales data for May, weekly jobless claims, export and import prices for May, industrial production for May and business inventories for April are due.

At 8:30 am ET, European Central Bank (ECB) will announce its interest rate decision. The ECB is set to hike its key interest rates by 25 bps to 4.00 percent. The central bank had earlier indicated that further policy tightening is required to combat high inflation.