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Japanese Yen Fell Due to the Disappointing GDP

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Nov. 17 2015, Published 7:40 a.m. ET

Japanese yen weakens by close to 0.8%

The US dollar-Japanese yen currency pair has an inverse relation to the Japanese yen. It rose nearly 0.8% on November 16, 2015. The currency pair reached a high of 123.3 before closing for the day at 123.2. The GDP (gross domestic product) release for the third quarter came out on a weak note. It proved to be one of the major drivers of the currency pair. The monetary policy statement by the BoJ (Bank of Japan) is scheduled for November 18. It’s expected to provide more direction about the currency pair.

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GDP fell by 0.2%

The Cabinet Office published the preliminary Japanese quarter-over-quarter GDP for 3Q15 at -0.2%. It indicates a contraction in the economy. It fell despite the ultra-easing policy adopted by the BoJ. The domestic demand fell by 0.3%. The major contraction was in the private non-residential investment. It fell by 1.3%. The public investment fell by 0.3%. The YoY (year-over-year) GDP fell by 0.8% against the forecasts of a 0.2% fall. This was the second consecutive quarter with a contraction in the Japanese economy.

Impact on the market

The fall in the yen correlated with the currency-based Guggenheim CurrencyShares Japanese Yen ETF (FXY). It was trading 0.44% lower at the close of trade on November 16, 2015. In contrast, the iShares MSCI Japan (EWJ) rose by 0.97%.

Japanese ADRs (American depositary receipts) on US exchanges were trading on a mixed note. Leisure goods maker Sony (SNE) rose 0.48%. In the banking arena, Mitsubishi UFJ Financial Group (MTU) fell by 0.59%, while Sumitomo Mitsui Financial Group (SMFG) rose by 1.1%.

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