Japanese Yen Firms On Inflation, Growth Concerns

The Japanese yen rose against its major counterparts in the Asian session on Thursday, as Asian stocks dropped amid concerns that inflationary pressures will lead to a tighter monetary policy and slow economic growth.

Investors fear that elevated inflation due to an energy crunch and supply-chain disruptions could force central banks to withdraw stimulus measures.

The Bank of Canada terminated its quantitative easing earlier than expected and suggested the possibility of a rate hike in the middle quarters of 2022.

The Fed is widely expected to announce a reduction in bond purchases when it meets next week.

The Bank of Japan maintained its massive monetary stimulus and downgraded its real GDP growth and consumer inflation forecasts.

The board, governed by Haruhiko Kuroda, voted 8-1, to hold the interest rate at -0.1 percent on current accounts that financial institutions maintain at the central bank.

The bank will continue to purchase a necessary amount of Japanese government bonds without setting an upper limit so that 10-year JGB yields will remain at around zero percent.

Data from the Ministry of Economy, Trade and Industry showed that Japan retail sales fell 0.6 percent on year in September - coming in at 12.041 trillion yen.

That beat forecasts for an annual decline of 2.3 percent following the 3.2 percent yearly drop in August.

The yen advanced to 113.50 against the greenback and 131.65 against the euro, up from its prior lows of 113.87 and 132.12, respectively. Next key resistance for the yen is seen around 112.00 against the greenback and 128.00 against the euro.

The yen touched a 3-day high of 123.54 against the franc, rising from a low of 124.01 seen at 5:15 pm ET. The yen is likely to find resistance around the 119.00 level.

The yen edged higher to 85.11 against the aussie, 81.33 against the kiwi and 91.71 against the loonie, following its previous lows of 85.60, 81.62 and 92.11, respectively. The yen is seen finding resistance around 83.00 against the aussie, 80.00 against the kiwi and 90.00 against the loonie.

After falling to 156.43 at 6:45 pm ET, the yen gained to 155.92 against the pound. If the yen strengthens further, it is likely to test resistance around the 153.00 level.

Looking ahead, German jobless rate and Eurozone economic confidence index for October will be released in the European session.

The European Central Bank will announce interest rate decision at 7:45 am ET. The ECB is expected to hold its main refi rate at a record low zero percent and the deposit rate at -0.50 percent.

At 8.00 am ET, Destatis is scheduled to issue German preliminary consumer inflation for October.

U.S. GDP data for the third quarter, weekly jobless claims for the week ended October 23 and pending home sales for September will be published in the New York session.