Japanese Yen bears not ready to give up yet amid reduced bets for a BoJ policy shift
|- The Japanese Yen remains confined in a range just below a multi-month low touched last week.
- Reduced bets for an imminent shift in the BoJ’s policy stance continue to undermine the JPY.
- Hawkish Fed expectations act as a tailwind for the USD and lend support to the USD/JPY pair.
The Japanese Yen (JPY) continues with its struggle to gain any meaningful traction and oscillates in a range against its American counterpart heading into the European session on Monday. The near-term bias, meanwhile, seems tilted in favour of bears in the wake of expectations that the Bank of Japan (BoJ) will delay its plan to tighten policy amid a recession in Japan. Apart from this, a modest US Dollar (USD) strength, bolstered by bets that the Federal Reserve (Fed) will keep interest rates higher for longer, acts as a tailwind for the USD/JPY pair.
Bullish traders, however, seem reluctant to place aggressive bets amid speculations that Japanese authorities will intervene in the markets to stem any further JPY weakness. Apart from this, persistent geopolitical tensions stemming from conflicts in the Middle East and the prolonged Russia-Ukraine war lend support to the safe-haven JPY. This contributes to capping gains for the USD/JPY pair. Investors now look to the US New Home Sales for some impetus later today, though the focus remains glued to the US Core PCE Price Index on Thursday.
Daily Digest Market Movers: Japanese Yen seems vulnerable amid reduced bets for a BoJ policy pivot
- Israel expressed its intentions to expand its operations to destroy Hamas amid the uncertainty over a ceasefire, while Russia is preparing a new offensive against Ukraine starting in late May or summer.
- This, along with the recent warnings from Japanese authorities that the government will intervene in the markets to stem further weakness in the domestic currency, offers support to the Japanese Yen.
- Data released earlier this month showed that Japan's economy entered a technical recession, and smashes hopes that the Bank of Japan will exit the ultra-easy policy regime, capping the JPY.
- The FOMC meeting minutes released last week, along with comments by Fed officials, indicated that the central bank is in no rush to cut interest rates as it aims to bring inflation to the 2% target.
- Expectations that the Fed will keep rates higher for longer remain supportive of elevated US Treasury bond yields and assist the US Dollar to hold steady above a three-week low touched last Thursday.
- This, along with the underlying bullish sentiment surrounding the global equity markets, undermines the safe-haven JPY and turns out to be a key factor acting as a tailwind for the USD/JPY pair.
- Investors now await this week's key US macro data, including the Core PCE Price Index, for fresh clues about the Fed's future policy decision before positioning for a firm near-term direction.
Technical Analysis: USD/JPY bulls might wait for move beyond multi-month top before placing fresh bets
From a technical perspective, any meaningful pullback is likely to find decent support near the 150.00 psychological mark. This is followed by last week's swing low, around the 149.70-149.65 region, which if broken could drag the USD/JPY pair further towards the 149.35-149.30 horizontal support en route to the 149.00 mark. Some follow-through selling below the 148.80-148.70 strong horizontal resistance breakpoint might shift the bias in favour of bearish traders and pave the way for deeper losses.
On the flip side, bulls need to wait for a sustained strength beyond the 150.85-150.90 area, or a multi-month top touched on February 13, before placing fresh bets. Given that oscillators on the daily chart are holding comfortably in the positive territory and are still away from being in the overbought zone, the USD/JPY pair might then climb to the 151.45 hurdle. The momentum could extend towards 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 | 0.01% | 0.05% | 0.02% | 0.07% | -0.11% | 0.25% | 0.02% | |
| EUR | -0.01% | 0.04% | 0.01% | 0.06% | -0.11% | 0.23% | 0.01% | |
| GBP | -0.05% | -0.04% | -0.02% | 0.02% | -0.15% | 0.21% | -0.02% | |
| CAD | -0.03% | -0.02% | 0.02% | 0.05% | -0.13% | 0.23% | -0.01% | |
| AUD | -0.11% | -0.06% | -0.02% | -0.05% | -0.17% | 0.18% | -0.05% | |
| JPY | 0.10% | 0.12% | 0.19% | 0.13% | 0.17% | 0.38% | 0.12% | |
| NZD | -0.26% | -0.24% | -0.20% | -0.23% | -0.17% | -0.35% | -0.23% | |
| CHF | -0.02% | -0.01% | 0.02% | 0.00% | 0.06% | -0.13% | 0.23% |
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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