USD/JPY is showing little movement in the Thursday session, as the pair trades just above the 109 line in the North American session. In economic news, there are no major Japanese events on the schedule. In the US, key numbers were mixed. PPI came in at -0.1%, missing the estimate of 0.0%. There was better news from unemployment claims, which remained unchanged at 234 thousand, beating the estimate of 242 thousand. Later in the day, the US releases UoM Consumer Sentiment, which is expected to drop to 97.1 points. On Friday, the US releases consumer spending and inflation numbers.
The yen improved to 5-month highs this week, as jittery investors have moved away from the US dollar in favor of the safe-haven Japanese yen. Escalating geopolitical concerns, particularly over Syria and North Korea, are weighing on the US dollar. The US bombed a Syrian military base last week, in response to a chemical attack by Syrian warplanes. Russia has strongly condemned the US move, chilling relations even further between the US and Russia. President Trump has declared that he has sent "an armada" to the Korean peninsula in response to North Korea firing ballistic missiles, and the escalation in rhetoric between North Korea has unnerved the markets. Also, Donald Trump said in a newspaper interview that the value of the US dollar was too strong and that he was in favor of a low interest rate policy. Trump’s comment has further weighed on the greenback and boosted the yen.
Earlier this week, Federal Reserve Chair Janet Yellen said that with the economy close to full employment and 2 percent inflation, the Fed was in a better position to reduce its support for the US economy. The minutes of the March meeting indicated that the Fed plans to trim the $4.5 trillion balance sheet, which has ballooned as a result of the huge asset-purchase program which started in response to the financial crisis in 2008. Yellen emphasized that the Fed’s policy stance is neutral, as interest rate increases will be gradual, given that the economy is growing at a moderate pace. The Fed is widely expected to raise rates twice more in 2017, with the next rate expected in June. At the same time, some Fed policymakers are in favor of three more rate hikes, which would bring the total this year to four moves.
