The Japanese yen continues to head higher, and has posted gains in the Monday session. Currently, USD/JPY is trading at 110.64, down 0.37% on the day. US markets are closed for Martin Luther King Day, so there are no US events. In Japan, PPI is expected to slow to 3.3%. On Tuesday, the US releases Empire State Manufacturing Index.
The yen posted four straight winning sessions last week, and is trading in green territory on Monday as well. The Japanese currency has gained 1.8% against the greenback in January, as the US dollar continues to show broad weakness. The Bank of Japan gave the yen a boost last week, after the BoJ reduced its bond purchases. The Bank trimmed its purchase of 10 to 25 year bonds and 25 to 40 bonds by JPY 10 billion yen each, to JPY 190 billion yen and 80 billion respectively. The cut to the 10-25 year bonds was the first in more than a year. This has raised speculation that the Bank will taper its massive stimulus program, which would likely bode well for the Japanese yen.
The US dollar remains under pressure, as consumer data for December was a mixed bag. CPI slowed to 0.1%, down from 0.4% a month earlier. Core CPI was stronger, improving to 0.3%. Both indicators were within expectations, but pointed to weak inflation levels. On the bright side, consumer spending remained strong. December retail sales, boosted by Christmas shopping, were up 5.4% compared to a year ago. Although investors were not impressed with the December data, as the euro rally continued, the spending numbers point to a strong finish for the economy in 2017.
