The Japanese core machinery orders data was significantly weaker than expected with a 3.0% decline for May following a 5.4% decline the previous month and this pushed orders to the lowest level for over 20 years. Although there was some recovery in key manufacturing orders, there was evidence of a notable deterioration in the services sector. The data will maintain pressure for the quantitative easing programme to be extended.
The data also sparked a further deterioration in risk appetite and this helped push the yen stronger with the currency strengthening to a six-week high against major currencies as the Nikkei index also weakened to the lowest level since late May. The dollar was near 94.25 in early Europe on Wednesday.
The dollar lost support near the 94 level in US trading and then weakened very sharply with lows below the 92 level before a recovery to 92.80. The Japanese currency also strengthened rapidly against the Euro and Sterling as technical levels were broken. There will be an increasing threat of verbal intervention to restrain the yen.
By: Darrell Jobman
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