​EBC Markets Briefing | Yen under pressures; PPI data pushed silver higher

The yen held onto overnight gains on Thursday but was pinned near 18-month lows as traders remained wary of intervention after strong warnings ahead of an election in Japan.

Reports of a sudden election at a time when the Japanese leader enjoys huge popularity have fuelled the so-called "Takaichi trade", characterized by a weak yen and rising equity markets.

Takaichi plans to dissolve parliament's lower house next week and call a snap parliamentary election, which has triggered fiscal concerns amid worries about the country's massive debt load

More than two-thirds of Japanese companies expect economy to suffer from deteriorating ties with China, according to a survey, highlighting rising concern over geopolitics, supply chains and export exposure.

Many employers saw the need to continue raising wages, signalling its optimism over the outlook that could justify raising still-low interest rates further. A weakening yen also justifies tighter financial conditions.

Encouragingly, household spending unexpectedly grew in November, rebounding from a sharp decline in October and aligning with a gradual recovery in private consumption.

The yen dropped from its recent low around 159.5 per dollar. The path of least resistance is to continue trading sideways, meaning it could head towards 158.2 per dollar soon.

Asset recap

As of market close on 14 January, among EBC products, silver led gains again. Economic data in the US showed that inflation on the producer side was 3% in November, exceeding forecasts for headline and core prices.

Intel hit its highest level in nearly 2 years, despite cooling AI frenzy. UBS has granted the stock a small confidence boost, lifting its price target on the company's share from $40 to $49.

Bank of America posted Q4 earnings that topped analysts' expectations on gains from net interest income and equities trading. Still traders did not view them as strong enough to continue push shares higher.

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