The stronger yen is crushing Japan -- here's what's happening in FX

Good morning!

The Japanese yen strengthened by as much as 0.7% to 109.35 per dollar earlier in the day.

As of 7:58 a.m. ET, the currency is stronger by 0.6% at 109.47 per dollar

The latest data from Japan showed that the stronger yen has been crushing exports. Goods sold abroad fell by 10.1% in April, while imports slumped by 23.3%. This left a trade surplus of 823.5 billion yen ($7.5 billion) — aka the largest since March 2010.

Notably, the yen has appreciated by as much as 9% against the dollar this year, which has made Japanese goods less attractive to overseas buyers.

Additionally, a preliminary survey showed Japanese manufacturing activity shrank at the fastest pace in over three years amid a drop in new orders. The Markit/Nikkei Flash Japan Manufacturing Purchasing Managers Index (PMI) fell to 47.6 in May on a seasonally adjusted basis, from a final 48.2 in April.

As for the rest of the world, here’s the scoreboard:

  • The US dollar is little changed at 95.33 ahead of the preliminary reading on US manufacturing activity in May, which will be out at 9:45 a.m. ET. Separately, Deutsche Bank thinks the US dollar is looking cheap. “The dollar has undergone a painful correction since the start of the year but we don’t believe this marks the end of the dollar uptrend,” the Deutsche Bank team wrote. “At around 8% the size of the dollar’s correction is the third largest in history compared to other dollar uptrends. The calendar length of the correction is approaching a record too. At 100 days it is the second longest in history which together with the size suggests we have likely seen the low in the dollar this year.”
  • The euro is little changed at 1.1212 against the dollar after European PMIs came in slightly lower than expected. Preliminary figures from Markit’s Purchasing Manager’s Index showed that European industry expanded marginally less than expected in the month, with a composite reading of 52.9, down from 53 in April, and lower than the 53.2 forecast. Activity in Europe’s service sector was flat at 53.1.
  • The Russian ruble is weaker by 0.4% at 67.0275 per dollar as oil prices continue to trickle lower. Brent crude oil is lower by 1.2% at $48.16 per barrel. Still, a bunch of Wall Street analysts think the petro-currency has some room to advance — even if oil prices don’t appreciate significantly.

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