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What’s happening: The Japanese yen recorded losses against the US dollar on Wednesday, as investors assessed economic reports.
What happened: The JPY/USD forex pair extended its downturn for the second day in a row following weaker domestic data.
However, weakness in the US dollar index limited the overall losses for the Japanese yen during Wednesday’s session.
Why it matters: The Japanese yen continued its downtrend, weakening lower than the 145.00 psychological level versus the greenback on Wednesday.
The Labour Ministry said real wages in Japan declined for the 20th straight month in November. Average cash earnings in Japan rose by 0.2% year-over-year in November. This represented a meaningful slowdown from the 1.5% growth recorded in October and was the slowest pace since December 2021.
The latest data came amid declining inflation in Japan’s capital city. Tokyo’s core Consumer Price Index fell to 2.1% year-over-year in December, matching the low recorded in June 2022. Tokyo reaffirmed prospects of the Bank of Japan not moving away from negative rates this month.
Household spending in Japan fell by 2.9% year-over-year in November, following a 2.5% decline in the previous month.
In other news, Japan’s government is looking to double its budget reserves to 1 trillion yen for the fiscal year beginning April to cover earthquake reconstruction costs.
Weakness in the US dollar limited the overall losses for the yen. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.2% to 102.36 on Wednesday.
The USD/JPY forex pair gained around 0.9% to 145.76 on Wednesday. The Nikkei 225 Index surged 2% to settle at 34,442, while the broader Topix Index gained 1.3% to 2,444, surging to their strongest levels in around 34 years.
What to watch: Investors await the release of coincident index and leading economic index from Japan today. The index of coincident economic indicators in Japan is expected to edge higher to 116 in November, from 115.9 in October, while the index of leading economic indicators is projected to rise to 109 in November, from 108.9 in the previous month.
Data on current account, bank lending and foreign bond investment, due to be released on Friday, will also remain in focus.
Context: Bitcoin prices fell on Wednesday following a series of fake tweets from the SEC’s (Securities and Exchange Commission) social account.
Details: Bitcoin, the top cryptocurrency by market capitalisation, had surged briefly on Tuesday after the SEC’s X account said it had given approval for ETFs (exchange-traded funds) in the cryptocurrency.
The US markets regulator later deleted the post on the social platform and said its account had been “compromised.” A SEC spokesperson said, “The SEC has determined that there was unauthorized access to and activity on the @SECGov x.com account by an unknown party for a brief period of time shortly after 4 pm ET.”
After completing the preliminary investigation into the post, X (formerly Twitter) said that it was not due to a breach of its systems.
Bitcoin prices surged to a 21-month high of $47,897 on Tuesday immediately after the false post. The crypto fell back below $46,000 after SEC’s clarification of the post.
What to watch: Markets will watch the SEC’s decision on spot bitcoin ETFs this week.
Investors await the release of inflation rate data from the US today, which is expected to significantly impact bitcoin prices. The annual inflation rate in the US, which eased to 3.1% in November, is expected to rise back to 3.2% in December.
Other Markets: European indices closed mostly lower on Tuesday, with the FTSE 100, CAC 40 and STOXX Europe 600 Index down by 0.42%, 0.01% and 0.18%, respectively, and the DAX 40 up by 0.01%.
The Mayor of Kharkiv, Ihor Terekhov, said two Russian S-300 missiles had hit a hotel in the region. The news sent the RUB/USD pair higher in forex trading this morning.
Australia’s trade surplus on goods widened to A$11.44 billion in November, from A$7.66 billion a month ago. The latest reading also exceeded market estimates of A$7.5 billion and lent support to the AUD/USD forex pair.
The Bank of Korea held the base rate at 3.5% at its first meeting of year, which sent the KRW/USD pair higher in forex trading this morning.
Colombia’s consumer confidence index rose by 3.6 points to a reading of -17.3 in December, lending support to the COP/USD forex pair.
Brazil’s car production declined by 15.3% to 172,000 units in December, compared to 1.5% growth in November, sending the BRL/USD pair lower in forex trading this morning.
Spain’s industrial production, Italy’s industrial production, South Africa’s manufacturing production, Turkey’s gross foreign exchange reserves, Brazil’s consumer price index, Mexico’s industrial production, US Initial jobless claims, natural gas stocks change and government budget, Germany’s current account, as well as Argentina’s inflation rate.
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