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- Japanese Yen stands tall near one-month top against USD on hawkish BoJ talks
Japanese Yen stands tall near one-month top against USD on hawkish BoJ talks
- The Japanese Yen continues to draw support from expectations for a hawkish BoJ pivot.
- Bets for a June Fed rate cut undermine the USD and further exert pressure on USD/JPY.
- An upward revision of Japan’s Q4 GDP print contributes to the offered tone on Monday.
The Japanese Yen (JPY) rallied to the highest level since early February against its American counterpart on Friday amid bets for an imminent shift in the Bank of Japan's (BoJ) policy stance. Moreover, investors seem convinced that another substantial pay hike in Japan will fuel demand-driven inflationary pressure and allow the BoJ to end the negative interest rates as early as the March 18-19 meeting. This, along with an upward revision of Japan's fourth-quarter GDP print, underpins the JPY and keeps the USD/JPY pair depressed through the Asian session on Monday.
Meanwhile, the US employment report for February reaffirmed expectations that the Federal Reserve (Fed) will start cutting interest rates in June and continues to weigh on the US Dollar (USD). This turns out to be another factor that contributes to the offered tone surrounding the USD/JPY pair for the sixth straight day and supports prospects for a further depreciating move. The market focus now shifts to the US consumer inflation figures, due for release on Tuesday. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.
Daily Digest Market Movers: Japanese Yen remains well supported by bets for an imminent shift in the BoJ’s policy stance
- The Japanese Yen remains on the front foot against its American counterpart for the sixth successive day on Monday amid bets that the Bank of Japan (BoJ) will end its negative rate policy in March.
- Jiji News Agency reported over the weekend that the BoJ is considering scrapping its yield curve control program and indicating in advance the amount of government bonds it plans to purchase.
- Furthermore, data released last week showed that wage growth in Japan marked the highest rise since last June and reaffirmed market bets for an imminent shift in the BoJ's monetary policy stance.
- A revised GDP report showed on Monday that Japan's economy expanded by 0.1% during the fourth quarter as against a 0.1% contraction reported previously and avoided a technical recession.
- This gives the BoJ more headroom to pivot away from its ultra-loose monetary policy settings, which continue to underpin the JPY and keep the USD/JPY pair depressed near a one-month low.
- A spike in the US unemployment rate to its highest level in two years lifted bets for a June rate cut by the Federal Reserve and dragged the US Dollar to its lowest level since mid-January on Friday.
- The headline NFP showed that the US economy added 275K jobs in February vs. 200K estimated, through was offset by a downward revision of the previous month's reading to 229K from 353 K.
- Investors now look forward to the release of the latest US consumer inflation figures on Tuesday for a fresh impetus, though the near-term bias seems tilted firmly in favour of the JPY bulls.
Technical Analysis: USD/JPY continues to show hows some resilience below 38.2% Fibo. level, remains vulnerable to sliding further
From a technical perspective, Friday's breakdown below the 100-day Simple Moving Average (SMA) was seen as a fresh trigger for bearish traders. This comes on top of the recent repeated failures ahead of the 152.00 mark, which constituted the formation of a double-top pattern on the daily chart. Moreover, oscillators on the said chart are holding deep in the negative territory and validate the bearish outlook for the USD/JPY pair. That said, it will still be prudent to wait for acceptance below the 38.2% Fibonacci retracement level of the December-February rally before positioning for further losses. Some follow-through selling below the 200-day SMA, currently pegged near the 146.30-146.25 region, will reaffirm the negative bias and drag spot prices below the 146.00 round figure, towards the 50% Fibo. level, around the 145.60 zone.
On the flip side, any meaningful recovery attempt beyond the 147.00 round figure is more likely to attract fresh sellers and remain capped near the 100-day SMA support breakpoint, now turned resistance near mid-147.00s. A sustained strength beyond, however, could trigger a short-covering rally and lift the USD/JPY pair beyond the 148.00 mark, towards testing the next relevant hurdle near the 148.65-148.70 region. The momentum could extend further towards reclaiming the 149.00 round figure en route to the 149.25 horizontal support-turned-resistance.
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 Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.01% | -0.03% | 0.15% | 0.14% | 0.09% | -0.01% | |
| EUR | -0.01% | -0.02% | -0.05% | 0.14% | 0.12% | 0.06% | -0.02% | |
| GBP | 0.00% | 0.01% | -0.03% | 0.14% | 0.15% | 0.10% | 0.00% | |
| CAD | 0.04% | 0.04% | 0.04% | 0.18% | 0.15% | 0.10% | 0.02% | |
| AUD | -0.15% | -0.14% | -0.14% | -0.19% | -0.01% | -0.06% | -0.16% | |
| JPY | -0.12% | -0.14% | 0.11% | -0.19% | 0.03% | -0.04% | -0.14% | |
| NZD | -0.09% | -0.06% | -0.09% | -0.13% | 0.06% | 0.05% | -0.11% | |
| CHF | 0.03% | 0.04% | 0.02% | -0.01% | 0.18% | 0.13% | 0.09% |
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).
Japanese Yen FAQs
What key factors drive the Japanese Yen?
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
How do the decisions of the Bank of Japan impact the Japanese Yen?
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, 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.
How does the differential between Japanese and US bond yields impact the Japanese Yen?
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
How does broader risk sentiment impact the Japanese Yen?
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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