The Dollar/Yen hits its highest level since November 16 on Monday amid views that the United States has an advantage in growing its economy and vaccinating its population against COVID-19. The move came on evidence pointing toward a stronger recovery from the coronavirus pandemic for the United States than for other countries.
At 04:54 GMT, the USD/JPY is trading 104.966, up 0.019 or +0.02%.
Japan’s Factory Activity Returns to Contraction in January as Output Falls – PMI
Japan’s factory activity slipped back into contraction in January, starting the year on a sour note as a rise in COVID-19 infections and a new state of emergency in the country hit operating conditions.
Manufacturers reported a renewed fall in output volumes, according to the private-sector data, sharply contrasting with Friday’s more upbeat government estimates that showed producers expecting a sharp rebound in output in January.
Firms attributed the production falls to restrictions implemented under the state of emergency called by Prime Minister Yoshihide last month, which covers Tokyo and other areas accounting for 55% of the nation’s population.
“Despite broad stabilization in December, the decline in January meant that the sector has not registered growth since April 2019,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey.
“Manufacturers indicated a renewed fall in output levels in the latest survey period. Moreover, firms were further discouraged to replace voluntary leavers in the sector as staffing levels reduced in January.”
US Factory Activity Cools Amid COVID-19 Flare-Up
U.S. manufacturing activity slowed slightly in January, while a measure of prices paid by factories for raw materials and other inputs jumped to its highest level in nearly 10 years, strengthening expectations inflation will perk up this year.
The moderation in activity reported by the Institute for Supply Management on Monday reflected a flare-up in COVID-19 infections, causing labor shortages in factories and their suppliers, which the ISM said “will continue to restrict the manufacturing economy expansion until the coronavirus crisis abates.” Manufacturing and housing are anchoring the economic recovery from the pandemic.
Daily Forecast
The dollar may be more resilient in the near-term because “both growth and vaccination favor the U.S,” said Kamal Sharma, director of G10 FX strategy at BofA Merrill Lynch Global Research.
Meanwhile, U.S.-based strategists at Wells Fargo Securities wrote, “We think USD strength still has room to run,” That’s especially true against more volatile securities, they added.