Japanese Yen Weakens Broadly and Crosses 150 per Dollar Threshold – Currency Thoughts
Japanese Yen Weakens Broadly and Crosses 150 per Dollar Threshold
July 31, 2025
The Japanese yen fell 0.7% overnight into this morning against the dollar, which otherwise declined by 0.3% against the euro and Swiss franc, 0.2% relative to sterling and 0.1% versus the Australian and New Zealand currencies. The yen got as low as 150.63 per dollar, not far from the 152 per dollar quote when Japanese officials intervened directly in the market to counter a depreciating trend back in October 2022. Selling pressure on the yen today had been encouraged after the Bank of Japan once again left its short-term interest rate unchanged at 0.50%. Policy tightening has been on pause since a 25-basis point hike last January, which had been the third increase following ones of 20 basis points in March 2024 and 15 bps in July 2024. While today’s decision had been anticipated, both the released statement and Governor Ueda’s press conference failed to clarify the timing of the next rate hike. No member of the BOJ Board voted to raise the rate now even though the quarterly Outlook for Economic Activity and Prices, also published today, increased core inflation projections for the current fiscal year.
On this last business day of July, equity markets rose 1.0% in Japan but closed down by 1.7% in Singapore, 1.6% in Hong Kong, 1.2% in China, and 0.9% in Indonesia. Share prices are also lower in France, Germany and Italy but unchanged in the U.K. and somewhat more pricey in the United States.
Ten-year sovereign debt yields have slid three basis points in Britain, two bps in the United States, and a basis p oint in Germany, Japan and Spain. Bitcoin has edged up 0.1, while prices for gold and oil are 0.1% and 0.3% lower.
A typical cornucopia of economic data were reported on this final day of the month.
U.S. inflation according to the Federal Reserve’s preferred indicator, the personal consumption price deflator, accelerated to a four-month high in June of 2.6% overall and 2.8% when excluding food and energy. Both are above target and consistent with the decision this week by central bank officials to maintain their pause on interest rate cuts, pending further clarification of the impact of President Trump’s aggressive use of trade tariffs. U.S. personal income and personal consumption expenditures each rose 0.3% during June.
From other U.S. releases today, investors learned that new jobless insurance claims last week had remained historically low at 218k; the Chicago regional manufacturing purchasing managers index climbed 6.6 points last month to a 4-month high but was again below the 50 neutral level at 47.0; and the employment cost index last quarter rose 0.9% for the fourth time in five quarters. The ECI’s year-on-year increase of 3.6% matched the first quarter’s result.
A 1.7% jump in Japanese industrial production during June mystified analysts expecting a third straight decline and produced the biggest 12-month increase (4.0%) since May 2023. Japanese retail sales also performed well, rise 1.0% on month and 2.0% from a year earlier. And construction orders recorded a bigger year-on-year increase (22.5%), marking the 10th on-year rise in 14 months. In contrast, housing starts (down 34.4% last month) fell on year for the 12th time in 14 months, and consumer confidence remained very depressed with a 33.4 reading. Such has been below 40 since May of 2019.
European price data highlights out today included 2.0% German consumer price inflation in July, the same as in June but a tick above analyst forecasts. A 1.4% on-year drop in German import prices was its lowest reading in 14 months and included a tiny 0.1% rate of non-energy import price inflation. French CPI inflation stayed at 1.0% in July, while producer price inflation in France of 0.2% in June was its highest in 23 months. Spanish consumer price inflation climbed 0.4 percentage points to 5-month high of 2.7% this month, while Italian CPI inflation of 1.7% lay in a 1.6-1.9% range for the sixth straight time.
China’s NBS government-authorized manufacturing and non-manufacturing purchasing manager indices for July printed at 2- and 3-month lows of 49.3 and 50.2 in July.
Australian retail sales jumped 1.2% in June and recorded a 27-month high on-year increase of 4.9%. Australian import prices in the second quarter fell 0.8% compared to the previous quarter and were 1.4% higher than a year earlier.
GDP in the former British colony of Hong Kong posted a much slower 0.4% quarterly increase in 2Q, but year-on-year growth of 3.1% constituted a six-quarter high.
Unemployment in the euro area last month was at a record low of 6.2% for a third straight time. 6.2% had initially been recorded in October and November of 2024.
The Central Bank of Brazil’s Selic interest rate was kept unchanged at 15.0%, a level reached after a 25-basis point hike in June. 15% represents steep increase since 10.5% between May 2024 and September 2024, justified by greater inflation risks. The target of 3.0% compares with a CPI on-year rise of 5.3% in May. According to a released statement,
The current scenario, marked by heightened uncertainty, requires a cautious stance in monetary policy. If the expected scenario materializes, the Committee foresees a continuation of the interruption of the rate hiking cycle to examine its yet-to-be-seen cumulative impacts, and then evaluate whether the current interest rate level, assuming it stable for a very prolonged period, will be enough to ensure the convergence of inflation to the target. The Committee emphasizes that it will remain vigilant, that future monetary policy steps can be adjusted and that it will not hesitate to resume the rate hiking cycle if appropriate.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Japan, Central Bank of Brazil, U.S. PCE price deflator, weak yen
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