- The Japanese Yen is undermined by diminishing odds for an early interest rate cut by the BoJ.
- A modest USD uptick also lends support to USD/JPY, though the Fed uncertainty might cap gains.
- Traders might prefer to wait on the sidelines ahead of the BoJ and FOMC policy meetings next week.
The Japanese Yen (JPY) struggles to build on its modest Asian session uptick against its American counterpart and hangs near the weekly low touched on Tuesday. The Bank of Japan (BoJ) Governor Kazuo Ueda offered a slightly bleaker assessment of the economy earlier this week and cooled bets for an early interest rate hike. This, along with the underlying strong bullish sentiment around the global equity markets, is seen undermining the safe-haven JPY. Apart from this, a modest US Dollar (USD) uptick acts as a tailwind for the USD/JPY pair.
Meanwhile, the outcome of Japan’s spring wage negotiations indicated that most firms have agreed to the trade unions’ wage rise demands, paving the way for an imminent shift in the BoJ’s policy stance. Apart from this, persistent geopolitical tensions could limit losses for the safe-haven JPY. Furthermore, the uncertainty over the Federal Reserve’s (Fed) rate-cut path might hold back the USD bulls from placing aggressive bets and cap the USD/JPY pair. Investors might also prefer to wait on the sidelines ahead of next week’s key central bank event risks.
The BoJ is scheduled to announce its policy decision on Tuesday, which will be followed by the outcome of the two-day FOMC meeting on Wednesday. This, in turn, will play a key role in determining the next leg of a directional move for the USD/JPY pair. In the meantime, Thursday’s US macro data – monthly Retail Sales, the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims – will be looked upon for short-term trading opportunities later during the early North American session.
Daily Digest Market Movers: Japanese Yen is pressured by reduced BoJ rate cut bets and positive risk tone
- Japan’s biggest companies responded to the Union’s wage hike demand in full, clearing the way for the Bank of Japan to end its negative interest rates as early as next week and underpinning the Japanese Yen.
- Japanese media reported that more BoJ policymakers are backing the idea of a policy shift at the upcoming policy meeting as pay hikes by major companies bring the 2% price stability target within reach.
- According to people familiar with the matter, the assessment of BoJ officials is that the central bank is close to liftoff, regardless of whether the first rate hike since 2007 comes in March or April policy meeting.
- That said, the BoJ Governor Kazuo Ueda said earlier this week that the central bank will seek an exit from easy policy when achievement of 2% inflation is in sight, cooling bets for an early interest rate hike.
- An Israeli attack hit a UN aid distribution centre in Rafah, while Lebanon’s Hezbollah said two of its fighters were killed in the Bekaa Valley after Israel launched attacks on the area for a second straight day.
- A report from US news site Politico says that senior US officials have told their Israeli counterparts that the Biden administration will support the targeting of high-value Hamas targets in and underneath Rafah.
- The slightly warmer US consumer inflation released on Tuesday fuelled speculations that the Federal Reserve might stick to its higher for longer narrative, though the markets are still pricing in a rate cut in June.
- This keeps the US Dollar bulls on the defensive and does little to provide any meaningful impetus to the USD/JPY pair as traders remain on the sidelines ahead of the BoJ and FOMC monetary policy meetings next week.
- In the meantime, Thursday’s release of US macro data – Retail Sales, Producer Price Index (PPI) and Weekly Initial Jobless Claims – might produce short-term trading opportunities ahead of the key central bank event risks.
Technical Analysis: USD/JPY is more likely to extend its consoliative price move around the 100-day SMA
From a technical perspective, the USD/JPY pair has been showing some resilience below the 38.2% Fibonacci retracement level of the December-February rally. The subsequent move up, however, struggled to find acceptance above the 100-day Simple Moving Average (SMA) and faltered ahead of the 23.6% Fibo. level. Moreover, oscillators on the daily chart are still holding deep in the negative territory and are still away from being in the oversold zone, suggesting that the path of least resistance for spot prices is to the downside.
That said, any further decline is likely to find some support near the overnight low, around the 147.25-147.20 area, ahead of the 147.00 mark and the 146.80 zone (38.2% Fibo.). This is closely followed by the 146.50-146.45 region, or the monthly trough, and the 200-day SMA, currently near the 146.30 region. Some follow-through selling, leading to a subsequent break below the 146.00 mark will be seen as a fresh trigger for bearish traders and drag the USD/JPY pair to mid-145.00s (50% Fibo.) en route to the 145.00 psychological mark.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.04% | 0.02% | 0.01% | 0.02% | -0.04% | -0.12% | -0.01% | |
| EUR | -0.04% | -0.02% | -0.04% | -0.03% | -0.09% | -0.16% | -0.05% | |
| GBP | -0.02% | 0.02% | -0.02% | -0.01% | -0.07% | -0.15% | -0.03% | |
| CAD | -0.01% | 0.05% | 0.04% | 0.02% | -0.04% | -0.13% | -0.01% | |
| AUD | -0.02% | 0.00% | -0.02% | -0.02% | -0.06% | -0.13% | -0.03% | |
| JPY | 0.04% | 0.09% | 0.07% | 0.03% | 0.08% | -0.08% | 0.04% | |
| NZD | 0.13% | 0.17% | 0.15% | 0.13% | 0.14% | 0.08% | 0.14% | |
| CHF | 0.01% | 0.05% | 0.03% | 0.01% | 0.03% | -0.03% | -0.11% |
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.