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- Japanese Yen improves as US Dollar struggles due to rising odds of Fed rate cuts
Japanese Yen improves as US Dollar struggles due to rising odds of Fed rate cuts
- The Japanese Yen appreciates as US Dollar faces challenges following weaker-than-expected US employment growth data released on Friday.
- Japan's Current Account surplus increased to ¥2,849.9 billion ($17.78 billion) in May, up from the prior ¥2,050.5 billion.
- Friday’s employment data prompted speculation that the Fed could initiate rate cuts sooner.
The Japanese Yen (JPY) extends its gains for the third successive session on Monday. The USD/JPY pair loses ground as US Dollar (USD) struggles following weaker-than-expected US employment growth data released on Friday.
Japan's Current Account surplus extended its growth streak to the 15th month in May. The Ministry of Finance reported on Monday that the current account increased to ¥2,849.9 billion ($17.78 billion) in May, up from ¥2,050.5 billion in the previous month, surpassing market expectations of ¥2,450.0 billion.
US Nonfarm Payrolls (NFP) surpassed market expectations in June, although the pace of growth was slower compared to May. Additionally, the Unemployment Rate also increased in June. These developments have prompted speculation among traders that the Federal Reserve (Fed) could potentially initiate interest rate cuts sooner rather than later.
According to the CME's FedWatch Tool, rate markets are currently pricing in a 70.7% probability of a rate cut in September, up from 64.1% just a week earlier.
Daily Digest Market Movers: Japanese Yen improves due to dovish sentiment surrounding Fed
- Japan's Labor Cash Earnings rose by 1.9% year-on-year in May, marking an acceleration from April's 1.6% increase and achieving the highest level since January. However, this growth rate fell short of market expectations, which had anticipated a 2.1% increase.
- US Nonfarm Payrolls (NFP) increased by 206,000 in June, following a rise of 218,000 in May. This figure surpassed the market expectation of 190,000.
- The US Unemployment Rate edged up to 4.1% in June from 4.0% in May. Meanwhile, Average Hourly Earnings decreased to 3.9% year-over-year in June from the previous reading of 4.1%, aligning with market expectations.
- OCBC strategists Frances Cheung and Christopher Wong observe that the persistent strength of USD/JPY is raising intervention expectations. However, there is speculation that authorities may monitor to what extent they allow for further depreciation before intervening.
- Federal Reserve Bank of Chicago President Austan Goolsbee stated on BBC Radio on Wednesday that bringing inflation back to 2% will take time and that more economic data are needed. However, on Tuesday, Fed Chair Jerome Powell said that the central bank is getting back on the disinflationary path, per Reuters.
- The Minutes from the Federal Reserve's June 11-12 monetary policy meeting, released on Wednesday, suggested that Fed officials were in a wait-and-see mode. "Some participants emphasized the Committee’s data-dependent approach, with monetary policy decisions being conditional on the evolution of the economy rather than being on a preset path."
- Rabobank FX strategists pointed out on Wednesday that yield differentials appear crucial to the USD/JPY outlook. They suggested that FX intervention could be imminent due to the weakness of the Japanese Yen, which is exerting downward pressure on consumer confidence.
Technical Analysis: USD/JPY hovers around 160.50
USD/JPY trades around 160.30 on Monday, showing a bullish inclination based on daily chart analysis. The pair remains within an ascending channel pattern. However, caution is warranted as the 14-day Relative Strength Index (RSI) has dropped below 70, indicating a potential weakening of the ongoing uptrend.
In the short term, USD/JPY could approach resistance near 162.50, which marks the upper boundary of the ascending channel. A breakout above this level might strengthen bullish sentiment, potentially driving the pair toward psychological resistance at 163.00.
On the downside, immediate support is seen around the 21-day Exponential Moving Average (EMA) at 159.62, followed by the lower boundary of the ascending channel around 159.00. A further decline below this channel support could see USD/JPY testing the vicinity of June's low at 154.55.
USD/JPY: Daily Chart
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | 0.03% | -0.21% | -0.06% | 0.02% | -0.14% | -0.09% | |
| EUR | -0.10% | 0.14% | 0.02% | 0.15% | 0.08% | 0.10% | 0.14% | |
| GBP | -0.03% | -0.14% | -0.16% | 0.04% | -0.06% | -0.04% | 0.00% | |
| JPY | 0.21% | -0.02% | 0.16% | 0.15% | 0.24% | 0.22% | 0.17% | |
| CAD | 0.06% | -0.15% | -0.04% | -0.15% | 0.04% | -0.08% | -0.02% | |
| AUD | -0.02% | -0.08% | 0.06% | -0.24% | -0.04% | 0.02% | 0.06% | |
| NZD | 0.14% | -0.10% | 0.04% | -0.22% | 0.08% | -0.02% | 0.05% | |
| CHF | 0.09% | -0.14% | -0.01% | -0.17% | 0.02% | -0.06% | -0.05% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Japanese Yen FAQs
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.
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.
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.
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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