Japanese Yen Rises, Gains Limited by Lack of Demand for Safe Haven

The Japanese yen traded either flat or higher against other most-traded currencies today, but gains were nowhere near enough to reverse yesterday’s losses. Markets calmed down after a bout of fear caused by escalating tensions in the Middle East, limiting demand for safe-haven currencies.
Markets were in a risk-off mode yesterday due to escalating tensions between the United States and Iran after the US military killed an Iranian general on Friday. Iran threatened with retaliation, while US President Donald Trump said in response that he identified 52 targets that the USA will strike if Iran acts aggressively. The resulting risk aversion helped the yen to start the week strong. But with no new developments, fears waned and demand for safety with them. And that means less incentive to buy the Japanese currency.
Released yesterday, the Jibun Bank Japan Manufacturing PMI showed a drop to 48.4 in December from 48.9 in November. The reading below the neutral 50.0 level indicated the eighth consecutive month of decline, making it the joint-sharpest contraction in three-and-a-half years. Furthermore, the quarterly performance was the worst since the second quarter of 2016. As for today’s data, the Jibun Bank Japan Services PMI fell to 49.4 last month from the previous month’s reading of 50.3, signaling that the services industries started to decline as well. And what is more, that was the worst decline in over three years, while the quarterly performance was the worst since the third quarter of 2016.
USD/JPY was at 108.41 as of 8:21 GMT today, trading near the opening level of 108.36. EUR/JPY fell from 121.31 to 121.19, and its daily low was at 121.00. GBP/JPY was at 142.80 after opening at 142.67 and falling to the daily low of 142.30.

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