- The Japanese Yen surged to a four-month top against the USD after BoJ Governor Ueda’s comments on Thursday.
- Rebounding US bond yields push the USD higher and assist USD/JPY to find support near the mid-142.00s on Friday.
- The divergent BoJ-Fed policy expectations keep a lid on any further recovery ahead of the crucial US NFP report.
The Japanese Yen (JPY) rallied over 3.5% intraday, to its strongest level in four months against the US Dollar (USD) on Thursday after Bank of Japan (BoJ) Governor Kazuo Ueda talked about options while moving away from negative interest rates. Ueda’s comments reinforced expectations that the BoJ will wind down its ultra-dovish, stimulus-heavy policies in 2024. This, along with a sharp USD pullback from a two-week high touched on Wednesday, led to the USD/JPY pair’s overnight slump to its lowest level since August.
Ueda, however, emphasized the necessity of continuing the loose monetary policy in the near term amid signs that the Japanese economy was cooling further. Apart from this, the risk-on rally in the US equity markets forced the safe-haven JPY to trim a part of its strong intraday gains and allowed the USD/JPY pair to rebound nearly 250 pips from the vicinity of mid-141.00s to end the day around the 144.00 round figure. Spot prices, however, struggle to capitalize on the momentum and meet with a fresh supply during the Asian session on Friday.
That said, a further recovery in the US Treasury bond yields revives the USD demand. This, along with a downward revision to Japan’s third-quarter GDP print, assists the USD/JPY pair in attracting some buyers near the 142.50-142.45 region. Spot prices climb back to the 143.65-143.70 region in the last hour, though remain in the negative territory for the second straight day. Dovish Federal Reserve (Fed) should keep a lid on any meaningful USD appreciating move as traders now look to the US Nonfarm Payrolls (NFP) report for a fresh impetus.
Daily Digest Market Movers: Japanese Yen pares intraday gains against the USD, looks to US NFP report
- The Japanese Yen recorded its biggest one-day rally against the US Dollar on Thursday in reaction to Bank of Japan Governor Kazuo Ueda’s faintly hawkish messaging about ending the ultra-loose monetary policy.
- Ueda pinned down the spring wage negotiations as the potential turning point on policy and told PM Kishida that the central bank hopes to see whether wages will rise sustainably and whether wage rises will push up service prices.
- Ueda earlier said that they have not yet reached a situation in which they can achieve the price target sustainably, stably and with sufficient certainty, and noted that stimulus measures are supporting the Japanese economy.
- The dismal domestic data released on Friday, showing that Japan’s economy contracted by a 2.9% YoY pace in the third quarter, worse than the initial estimate of a 2.1% drop, lends some support to the USD/JPY pair on Friday.
- On a quarterly basis, Japan’s GDP shrank by 0.7% during the July-September period as compared to the 0.5% fall reported originally and a median forecast for a 0.5% decline.
- The yield on the benchmark 10-year US government bond moves away from a three-month low and helps revive the US Dollar demand, assisting the USD/JPY pair to trim a part of Asian session losses.
- Growing acceptance that the Federal Reserve is done raising interest rates and may start easing its policy by the first half of 2024 should cap the USD, warranting caution for the USD/JPY bulls.
- Investors now look forward to the crucial US NFP report, which is expected to show that the economy added 180K jobs in November and the unemployment rate held steady at 3.9%, for some meaningful impetus.
Technical Analysis: USD/JPY manages to defend the 61.8% Fibo. level amid oversold RSI on the daily chart
From a technical perspective, spot prices on Thursday showed some resilience below the 61.8% Fibonacci retracement level of the July-November rally and the very important 200-day Simple Moving Average (SMA). The subsequent recovery, however, struggles to find acceptance above the 144.00 round figure, which should now act as a key pivotal point for short-term traders. With the Relative Strength Index (RSI) on the daily chart flashing oversold conditions, a sustained strength beyond might trigger a short-covering rally and allow the USD/JPY pair to reclaim the 145.00 psychological mark.
On the flip side, the Asian session low, around mid-142.00s, coinciding with the 61.8% Fibo. level now seems to protect the immediate downside. This is closely followed by the 200-day SMA, currently near the 142.30 region, below which the USD/JPY pair could slide below the 142.00 mark and retest the multi-month trough, around the 141.60 region touched the previous day. The downward trajectory could get extended further towards the 141.00 mark en route to the 140.80-140.75 zone.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.03% | -0.03% | -0.18% | -0.31% | -0.38% | -0.04% | -0.05% | |
| EUR | -0.02% | -0.05% | -0.20% | -0.34% | -0.40% | -0.07% | -0.05% | |
| GBP | 0.04% | 0.06% | -0.15% | -0.28% | -0.35% | -0.01% | 0.00% | |
| CAD | 0.20% | 0.22% | 0.17% | -0.12% | -0.18% | 0.13% | 0.15% | |
| AUD | 0.31% | 0.34% | 0.29% | 0.14% | -0.07% | 0.25% | 0.28% | |
| JPY | 0.28% | 0.42% | 0.37% | 0.19% | 0.05% | 0.26% | 0.24% | |
| NZD | 0.05% | 0.07% | 0.02% | -0.15% | -0.30% | -0.34% | 0.01% | |
| CHF | 0.04% | 0.06% | 0.00% | -0.16% | -0.32% | -0.36% | -0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.