Japanese Yen eases from over one-week high, bulls turn cautious ahead of US PCE Price Index
|- The Japanese Yen gains strong positive traction in reaction to hawkish remarks by BoJ's Takata.
- A modest USD downtick exerts additional pressure on USD/JPy and contributes to the decline.
- Traders now look to the release of the crucial US PCE Price Index for a fresh directional impetus.
The Japanese Yen (JPY) catches aggressive bids during the Asian session on Thursday following a fresh intervention warning and hawkish comments by the Bank of Japan (BoJ) board member Hajime Takata. Apart from this, a generally weaker tone around the equity markets provides an additional boost to the safe-haven JPY. This, along with a modest US Dollar (USD) weakness, drags the USD/JPY pair to over a one-week low.
Spot prices, however, manage to bounce back the 150.00 psychological mark as traders seem reluctant to place aggressive directional bets ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index. The crucial US inflation data will influence the Federal Reserve's (Fed) future policy decisions, which, in turn, will drive the US Dollar (USD) and provide a fresh directional impetus to the USD/JPY pair.
Daily digest market movers: Japanese Yen sticks to hawkish BoJ-inspired gains amid softer USD
- Bank of Japan board member Hajime Takata said that the central bank must consider taking a nimble and flexible approach towards an exit from ultra-loose monetary policy as the achievement of the 2% inflation target is becoming within sight.
- A softer risk tone further benefits the safe-haven Japanese Yen amid warning by Japan's vice finance minister for international affairs, Masato Kanda, saying that the government is ready to take appropriate action against excessive exchange-rate moves and volatility.
- Slightly warmer consumer inflation in Japan fuelled speculations that the BoJ will eventually pivot away from its ultra-loose policy settings, though an unexpected recession could delay the central bank's plan to tighten its monetary policy.
- Official data released this Thursday showed that Japanese Retail Sales registered higher-than-expected growth of 2.3% over 12 months through January, while Industrial Production sank 7.5% during the reported month.
- The second reading of the US GDP print published on Wednesday showed that the world's largest economy expanded by a 3.2% annualized pace during the fourth quarter, revised down from the advance estimate of a 3.3% increase.
- Nevertheless, the data suggested that the US economy remains in good shape, which, along with hawkish remarks by several Federal Reserve officials, reiterating the higher-for-longer interest rates narrative, favours the US Dollar bulls.
- New York Fed President John Williams said that the central bank is likely to begin cutting interest rates this year depending on how the data come in, though there is still a way to go before hitting the 2% inflation target.
- Atlanta Fed President Raphael Bostic stressed that the US central bank has not declared victory over inflation yet and added that he is comfortable advising patience when it comes to loosening monetary policy.
- Furthermore, Boston Fed Bank President Susan Collins noted that it will likely become appropriate to begin easing policy later this year but the path to returning inflation to its 2% target will likely continue to be bumpy.
- This continues to act as a tailwind for the US Dollar and should lend some support to the USD/JPY pair ahead of the key US Personal Consumption Expenditures (PCE) Price Index – the Fed's preferred inflation gauge.
- Thursday's US economic docket also features the release of the usual Weekly Initial Jobless Claims, the Chicago PMI and Pending Home Sales, which, along with Fed speak, might infuse some volatility in the markets.
Technical analysis: USD/JPY bears have the upper hand, could aim to test 149.35-149.30 support
From a technical perspective, acceptance below the 150.00 psychological mark might have already set the stage for a further depreciating move. Some follow-through selling below the 149.70-149.65 region will reaffirm the negative bias and drag the USD/JPY pair to the 149.35-149.30 intermediate support en route to the 149.00 round figure. A convincing break below the latter might shift the near-term bias in favour of bearish traders and pave the way for some meaningful downside.
On the flip side, the 150.85-150.90 region, or a multi-month top, might continue to act as an immediate strong resistance, above which the USD/JPY pair could accelerate the positive move towards the 151.45 hurdle. The momentum could extend further and lift spot prices 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 Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.06% | -0.01% | 0.00% | -0.17% | -0.37% | -0.08% | -0.03% | |
| EUR | -0.07% | -0.07% | -0.06% | -0.22% | -0.48% | -0.13% | -0.10% | |
| GBP | 0.01% | 0.07% | 0.01% | -0.15% | -0.40% | -0.07% | -0.02% | |
| CAD | 0.00% | 0.08% | -0.01% | -0.16% | -0.41% | -0.07% | -0.03% | |
| AUD | 0.17% | 0.23% | 0.15% | 0.16% | -0.20% | 0.10% | 0.13% | |
| JPY | 0.36% | 0.46% | 0.38% | 0.40% | 0.24% | 0.37% | 0.38% | |
| NZD | 0.07% | 0.13% | 0.06% | 0.07% | -0.09% | -0.34% | 0.07% | |
| CHF | 0.04% | 0.11% | 0.02% | 0.03% | -0.14% | -0.33% | -0.03% |
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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