The Japanese Yen (JPY) holds ground against the US Dollar (USD), buoyed by a second straight month of rising real wages in Japan. In July, Japan’s Labor Cash Earnings grew by 3.6% year-on-year, a deceleration from June's 4.5% increase but the highest since January 1997, surpassing market expectations of 3.1%. This strong performance reinforces speculation that the Bank of Japan (BoJ) may implement another interest rate hike before the end of 2024.
Bank of Japan (BoJ) Board Member Hajime Takata made some comments on the bank’s policy outlook and economic prospects during his speech on Thursday. Japan's economy is recovering moderately although some weak signs were seen. Stock and FX markets have seen big volatility but we still see achievement of our inflation target in sight.
The US Dollar recovers its recent losses, driven by improved US Treasury yields. However, the Greenback faced challenges after July's US JOLTS Job Openings came in below expectations, signaling a further slowdown in the labor market. Traders now await US ISM Services PMI and Initial Jobless Claims scheduled to be released on Thursday.
USD/JPY trades around 143.80 on Thursday. An analysis of the daily chart shows that the nine-day Exponential Moving Average (EMA) remains below the 21-day EMA, signaling a sustained bearish trend in the market. Furthermore, the 14-day Relative Strength Index (RSI) is hovering near the 30 level, confirming the ongoing bearish momentum but also suggesting a potential upward correction in the near term.
On the downside, support could be found near the seven-month low of 141.69, recorded on August 5. Additional key support appears at 140.25, which is the lowest level since July 2023.
In terms of resistance, the pair might first encounter a barrier at the nine-day EMA around 145.00, followed by the 21-day EMA at 146.32. A break above these EMAs might diminish the bearish sentiment and help the pair move toward the psychological level of 150.00.
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Swiss Franc.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.06% | 0.00% | 0.04% | 0.03% | 0.00% | -0.03% | 0.07% | |
EUR | -0.06% | -0.04% | 0.02% | 0.01% | -0.03% | -0.04% | -0.00% | |
GBP | -0.00% | 0.04% | 0.04% | 0.05% | 0.00% | 0.00% | 0.04% | |
JPY | -0.04% | -0.02% | -0.04% | -0.01% | -0.06% | -0.09% | 0.00% | |
CAD | -0.03% | -0.01% | -0.05% | 0.00% | -0.02% | -0.05% | 0.00% | |
AUD | -0.00% | 0.03% | 0.00% | 0.06% | 0.02% | -0.01% | 0.05% | |
NZD | 0.03% | 0.04% | -0.00% | 0.09% | 0.05% | 0.01% | 0.05% | |
CHF | -0.07% | 0.00% | -0.04% | -0.01% | -0.01% | -0.05% | -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).
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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