Japanese Yen hangs near weekly low against USD as traders assess Japan's wages hike data
|- The Japanese Yen attracts some buyers following the overnight fall to the weekly low.
- Positive news on wage hikes revives BoJ rate hike bets and lends some support to the JPY.
- The USD fades the warmer US CPI-led spike and fails to provide impetus to USD/JPY.
The Japanese Yen (JPY) struggles to capitalize on its modest intraday gains and turns lower for the second straight day on Tuesday, albeit manages to hold its neck above the weekly low touched against its American counterpart the previous day. The overnight dovish remarks by the Bank of Japan (BoJ) Governor Kazuo Ueda cooled bets for an early interest rate hike. Apart from this, the underlying strong bullish sentiment across the global equity markets turn out to be key factors acting as a headwind for the safe-haven JPY. The downside, however, seems limited amid bets for an imminent shift in the BoJ's policy stance.
The outcome of Japan’s spring wage negotiations indicates that most firms have agreed to the trade unions' wage rise demands. This comes on top of a report that the Bank of Japan (BoJ) is considering a March interest rate hike, which, along with persistent geopolitical tensions, might hold back traders from placing any bearish bets around the JPY. Adding to this, subdued US Dollar (USD) price action, amid the uncertainty over the Federal Reserve's (Fed) rate-cut path, contribute to capping the USD/JPY pair. Traders might also prefer to wait for next week's key central bank event risks – the BoJ decision on Tuesday, followed by the Fed policy update on Wednesday.
Daily Digest Market Movers: Bulls seem non-committed despite positive news on wage hikes in Japan
- Expectations that Japan's biggest companies will offer sizeable pay increases and clear the way for the Bank of Japan to end its negative interest rates as early as next week lend some support to the Japanese Yen.
- In fact, Japan’s largest umbrella group for unions, Rengo, said that its affiliated members demanded an average wage increase of 5.85% this year, which, in turn, would mark the biggest increase in around 31 years.
- Meanwhile, Toyota, GS Yuasa, Nissan Motor, Nippon Steel and Hitachi responded to the Union's wage hike demand in full, while Okuma Corp hiked wages by ¥15,960 vs. union demand of ¥18,215.
- Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said on Wednesday that he sees strong momentum for wage hikes and that it is important for wage hikes to spread to mid-sized, small companies.
- Adding to this, Japan PMI Kishida will reportedly call for pay hikes exceeding last year at small and mid-sized firms during meeting with labor unions management.
- According to people familiar with the matter, the assessment of BoJ officials is that the central bank is close to liftoff, regardless of whether the first interest rate hike since 2007 comes in March or April policy meeting.
- BoJ Governor Kazuo Ueda said on Tuesday that the central bank will seek an exit from easy policy when achievement of 2% inflation is in sight, smashing hopes for an imminent shift in the policy stance next week.
- Data released from the US showed that the headline Consumer Price Index (CPI) rose 0.4% in February, while the yearly rate came in at 3.2% as compared to January's final print and market expectations of 3.1%.
- Annual Core CPI, which excludes volatile food and energy prices, increased 3.8% during the reported month, slightly below the January rise of 3.9% but was above consensus estimates for a reading of 3.7%.
- The slightly warmer US consumer inflation figures boosted the US Treasury bond yields, which should act as a tailwind for the US Dollar and help limit any meaningful depreciating move for the USD/JPY pair.
Technical Analysis: USD/JPY needs to find acceptance above 100-day SMA and move beyond 148.00 for bulls to seize control
From a technical perspective, spot prices struggled to find acceptance above the 100-day Simple Moving Average (SMA) and the 148.00 round-figure mark on Tuesday. The subsequent decline, along with the formation of a bearish double-top pattern in the vicinity of the 152.00 mark, or the YTD peak touched in February, suggests that the recent bearish trend might still be far from being over. Moreover, oscillators on the daily chart are holding deep in the negative territory and suggest that the path of least resistance for the USD/JPY pair is to the downside.
Any further downfall, however, is likely to find some support near the 147.00 mark ahead of the 146.80 region, representing the 38.2% Fibonacci retracement level of the December-February rally. Some follow-through selling will expose the very important 200-day SMA, currently pegged near the 146.25 region, which if broken decisively will be seen as a fresh trigger for bearish traders. The USD/JPY pair might then weaken further below the 146.00 round figure and accelerate the slide towards the 50% Fibo. level, around the 145.55-145.50 zone.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.00% | 0.01% | 0.03% | -0.22% | 0.02% | -0.01% | |
| EUR | -0.01% | -0.01% | 0.00% | 0.03% | -0.23% | 0.00% | -0.02% | |
| GBP | 0.00% | 0.01% | 0.01% | 0.04% | -0.22% | 0.01% | -0.01% | |
| CAD | -0.01% | 0.00% | -0.01% | 0.01% | -0.23% | 0.00% | -0.02% | |
| AUD | -0.03% | -0.03% | -0.04% | -0.01% | -0.25% | -0.04% | -0.07% | |
| JPY | 0.22% | 0.25% | 0.23% | 0.22% | 0.29% | 0.22% | 0.21% | |
| NZD | -0.01% | -0.01% | -0.01% | 0.00% | 0.02% | -0.23% | -0.02% | |
| CHF | 0.01% | 0.02% | 0.00% | 0.02% | 0.04% | -0.21% | 0.02% |
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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