Japanese Yen consolidates as traders adopt caution ahead of BoJ Ueda's speech
|- The Japanese Yen consolidates due to hawkish sentiment surrounding the BoJ's policy outlook.
- A Reuters poll suggested that 31 out of 54 economists expect the BoJ to raise rates before the end of the year.
- The recent FOMC Minutes suggested that most Fed officials agreed on a rate cut in September.
The Japanese Yen (JPY) moves sideways against the US Dollar (USD) on Thursday. A Reuters poll conducted from August 13-19, published on Wednesday, indicated that 31 out of 54 economists expect the Bank of Japan to raise borrowing costs before the end of the year. The median forecast points to a 25 basis point hike, which would bring the end-of-year rate to 0.50%.
However, The USD/JPY pair gained ground as the JPY depreciated following the record trade deficit report released on Wednesday. Traders are anticipating Bank of Japan (BoJ) Governor Kazuo Ueda's appearance in parliament on Friday, where he will discuss the central bank's decision last month to raise interest rates.
The US Dollar (USD) edged higher on Thursday, supported by a slight recovery in Treasury yields. However, the Greenback's upside may be limited, as the Federal Reserve is expected to implement 100 basis points (bps) in rate cuts in 2024. Market analysts remain divided on whether the Fed will opt for a 25 or 50 bps cut at its September meeting.
CME FedWatch Tool suggests that the markets are now pricing in a nearly 65.5% chance of a 25 basis point (bps) Fed rate cut in its September meeting, down from 71.0% a day ago. The probability of a 50 basis point rate cut increased to 34.5% from 29.0% a day earlier.
Daily Digest Market Movers: Japanese Yen holds ground ahead of BoJ Governor Ueda’s speech
- Traders adopt caution ahead of the Federal Reserve (Fed) Chair Jerome Powell’s keynote speech at the Jackson Hole Annual Symposium on Friday. Powell may deliver a statement about the possibility of interest rate cuts in the United States (US) is highly anticipated.
- FOMC Minutes for July’s policy meeting indicated that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming meeting in September as long as inflation continued to cool.
- Japan's Merchandise Trade Balance fell into a deficit of ¥621.84 billion in July, reversing the surplus of ¥224.0 billion reported in June and missing market estimates of a ¥330.7 billion shortfall. Japan's imports surged by 16.6% year-on-year in July, reaching a 19-month high of ¥10,241.01 billion, significantly up from the 3.2% rise in June. Meanwhile, exports increased by 10.3% YoY to a seven-month high of ¥9,619.17 billion, falling short of market forecasts of 11.4%.
- Federal Reserve (Fed) Governor Michelle Bowman expressed caution on Tuesday about making any policy changes, citing ongoing upside risks to inflation. Bowman warned that overreacting to individual data points could undermine the progress already achieved, according to Reuters.
- According to Reuters, the Bank of Japan (BoJ) had projected that a strong economic recovery would help inflation reach its 2% target sustainably. This would justify further interest rate increases, following last month's hike as part of the BoJ's ongoing effort to unwind years of extensive monetary stimulus.
- Federal Reserve Bank of San Francisco President Mary Daly emphasized Sunday that the US central bank should take a gradual approach to reducing borrowing costs, according to the Financial Times. Additionally, Federal Reserve Bank of Chicago President Austan Goolsbee warned that central bank officials should be cautious about keeping a restrictive policy in place longer than necessary, per CNBC.
- On Thursday, Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, said that the reports are simply positive overall and “it supports the BoJ’s view and bodes well for further rate hikes, although the central bank would remain cautious as the last rate increase had caused a sharp spike in the Yen.”
Technical Analysis: USD/JPY remains above 145.00
USD/JPY trades around 145.20 on Thursday. Analysis of the daily chart shows that the pair is consolidating under a downtrend line, suggesting a bearish bias. Furthermore, the 14-day Relative Strength Index (RSI) is slightly above 30, suggesting a potential correction for the pair.
For support levels, the USD/JPY pair might navigate the region around the psychological level at 144.00 A break below this level could lead the pair to navigate the area around a seven-month low of 141.69, which was recorded on August 5. A further drop could drive the pair toward the next significant support level at 140.25.
On the upside, the USD/JPY pair could encounter an immediate resistance at the downtrend line around the nine-day Exponential Moving Average (EMA) at the 146.45 level. A breakthrough above this level could weaken the bearish bias and support the pair to test the resistance level at 154.50, which has transitioned from previous support to current resistance.
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 weakest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.13% | -0.04% | 0.00% | -0.13% | -0.08% | -0.14% | -0.19% | |
| EUR | -0.13% | -0.17% | -0.16% | -0.28% | -0.22% | -0.29% | -0.32% | |
| GBP | 0.04% | 0.17% | 0.00% | -0.10% | -0.04% | -0.11% | -0.15% | |
| JPY | 0.00% | 0.16% | 0.00% | -0.22% | -0.08% | -0.15% | -0.19% | |
| CAD | 0.13% | 0.28% | 0.10% | 0.22% | 0.06% | -0.01% | -0.05% | |
| AUD | 0.08% | 0.22% | 0.04% | 0.08% | -0.06% | -0.06% | -0.11% | |
| NZD | 0.14% | 0.29% | 0.11% | 0.15% | 0.00% | 0.06% | -0.05% | |
| CHF | 0.19% | 0.32% | 0.15% | 0.19% | 0.05% | 0.11% | 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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