September 09, 2020 at 01:41PM

One example of how the crisis become a catalyst for the processes that were in place previously is the deterioration of Japanese production.

Machin tools orders in Japan published today showed a 31% YoY drop in July. These numbers are better than the 53% decline two months earlier. However, July is the 22nd month of consecutive year-on-year decline.

Machinery and equipment are expensive goods whose sales abroad (to China, US, Middle East) boosted exports and supported fundamental demand for yen. The long and continuing decline in machine tool orders coincided with trade frictions between the USA and China, the UK and EU, and the collapse of oil prices.

For the yen, this meant less support from exports. Without a constant flow of funds from foreign trade, the yen also risks losing its safe-haven status. In March we saw the USDJPY fly up during the strongest storm in the markets, making the dollar the only haven.

The FxPro Analyst Team

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From: The FxPro Analyst Team
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