Japanese Yen advances further against USD as fears of intervention remain intact
|- The Japanese Yen attracts some follow-through buying amid intervention fears.
- Bulls seem unaffected by data showing that Japan’s economy contracted in Q4.
- Delayed Fed rate cut bets lend support to the USD and limit losses for USD/JPY.
The Japanese Yen (JPY) gains positive traction for the second successive day on Thursday and moves further away from a three-month low touched against its American counterpart the previous day. On Wednesday, Japan's top officials hinted at a potential intervention to stem any further weakness in the domestic currency. This, along with the risk of a further escalation of geopolitical tensions in the Middle East, boosts demand for the safe-haven JPY and drags the USD/JPY pair back closer to the 150.00 psychological mark heading into the European session.
The aforementioned supporting factors help offset the weaker data, showing that Japan's economy unexpectedly contracted in the fourth quarter. This confirms a technical recession and raises uncertainty about the likely timing of when the Bank of Japan (BoJ) will exit the negative interest rates policy. Meanwhile, Tuesday's hotter-than-expected US consumer inflation figures reaffirmed that the Federal Reserve will keep rates higher for longer. This lends some support to the US Dollar (USD) and should contribute to limiting losses for the USD/JPY pair.
Daily Digest Market Movers: Japanese Yen is underpinned by a combination of factors
- Japan's top currency diplomat Masato Kanda said on Wednesday that the nation would take appropriate actions on forex if needed, which is seen lending some support to the Japanese Yen.
- Provisional data released this Thursday showed that Japan's GDP contracted by 0.4% during the October-December period, missing market expectations for a 1.4% growth by a huge margin.
- This comes on top of the previous quarter's slump of 3.3%, confirming a technical recession and raising uncertainty about the Bank of Japan's plans to exit its ultra-easy policy sometime this year.
- Japan's Economic Minister Yoshitaka Shindo expect the BoJ to work closely with government, take appropriate monetary policy to sustainably, stably achieve its price target accompanied by wage rises.
- Furthermore, the overnight rebound in the US equity markets might contribute to capping the safe-haven JPY, which, along with a bullish US Dollar, should limit losses for the USD/JPY pair.
- The US inflation data for January released on Tuesday pushed back expectations for the first interest rate cut by the Federal Reserve to the middle of the year and should underpin the USD.
- Fed funds futures have priced out a rate cut in March and see a nearly 80% chance of easing at the June meeting, and about three rate cuts of 25 basis points each by the end of this year.
- The US Retail Sales figures for January are due for release later during the North American session, with consensus estimates pointing to a 0.1% fall as compared to a flat reading last month.
- Thursday's US economic docket also features the Empire State Manufacturing Index, the Philly Fed Manufacturing Index, the usual Weekly Initial Jobless Claims and Industrial Production data.
Technical Analysis: USD/JPY could weaken further once the 150.00 pivotal support is broken
From a technical perspective, the USD/JPY pair could find some support near the 150.00 psychological mark. Some follow-through selling has the potential to drag spot prices further towards the 149.65-149.60 region en route to the 149.25-149.20 area and the 149.00 round figure. The latter should act as a key pivotal point, which if broken decisively might prompt some technical selling and pave the way for some meaningful corrective decline.
On the flip side, the multi-month top, around the 150.85-150.90 region, touched on Tuesday, now seems to act as an immediate hurdle. A sustained strength beyond could lift the USD/JPY pair further towards the 151.45 intermediate hurdle en route to the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and retested in November 2023.
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 US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.04% | 0.03% | 0.05% | 0.31% | -0.21% | 0.15% | 0.05% | |
| EUR | -0.04% | -0.02% | 0.01% | 0.26% | -0.25% | 0.11% | 0.02% | |
| GBP | -0.03% | 0.00% | 0.01% | 0.26% | -0.25% | 0.11% | 0.02% | |
| CAD | -0.05% | 0.00% | -0.01% | 0.25% | -0.25% | 0.10% | 0.01% | |
| AUD | -0.29% | -0.26% | -0.26% | -0.26% | -0.52% | -0.16% | -0.24% | |
| JPY | 0.21% | 0.26% | 0.23% | 0.26% | 0.50% | 0.36% | 0.27% | |
| NZD | -0.15% | -0.10% | -0.11% | -0.10% | 0.15% | -0.35% | -0.09% | |
| CHF | -0.05% | -0.01% | -0.02% | 0.00% | 0.25% | -0.26% | 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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