Japanese Yen remains lukewarm amid stronger US Dollar

The Japanese Yen lost ground after the release of Japan’s Trade Balance on Wednesday.
Japan posted a trade deficit of ¥462.5 billion in April, a significant shift from the previous month's surplus.
Traders await FOMC Minutes to seek further clues about the Fed policy stance.

The Japanese Yen (JPY) weakened following the release of Japan's Merchandise Trade Balance data on Wednesday. The report showed that the trade deficit increased to ¥462.5 billion in April, swinging from the previous surplus of ¥387.0 billion. This outcome exceeded market expectations of a deficit of ¥339.5 billion. The deficit was mainly driven by the recent depreciation of the JPY, which led to an increase in the value of imports, outweighing gains from a rise in exports.

Japan’s Exports (YoY) grew by 8.3% to ¥8,980.75 billion, marking the fifth consecutive month of growth but falling short of forecasts for an 11.1% increase. Imports also expanded by 8.3%, representing the strongest growth in 14 months, reaching a four-month peak of ¥9,443.26 billion. This growth reversed the trend from a revised 5.1% drop in March.

The US Dollar (USD) advanced ahead of the release of the Minutes from the Federal Open Market Committee (FOMC) meeting held on May 1, which are expected to be published on Wednesday. The increase in US Treasury yields supported the Greenback.

Daily Digest Market Movers: Japanese Yen depreciates amid hawkish Fedspeak

Japan’s 10-year government bond yield surpassed 1% on Wednesday for the first time since May 2013, fueled by traders' increasing bets that the Bank of Japan would tighten policy further in 2024
According to the CME FedWatch Tool, the probability of the Federal Reserve implementing a 25 basis-point rate cut in September has seen a slight uptick to 50.3%, compared to 49.6% a day ago.
Federal Reserve Bank of Boston President Susan Collins highlighted on Tuesday that progress toward interest rate adjustment will require more time, emphasizing patience as the appropriate policy for the Fed. Additionally, Federal Reserve Governor Christopher Waller mentioned that he would need to observe several more months of positive inflation data before feeling comfortable supporting a policy easing, per Reuters.
On Tuesday, Japanese Finance Minister Shunichi Suzuki expressed concerns about the negative implications of the weak JPY. Suzuki also said that market discussions are centered on long-term rates as they increase, focusing on appropriate national debt policies in Japan. There are hopes for wage hikes to surpass the inflation pace. He stated that he is closely monitoring FX movements.
A BoJ survey showed on Monday that approximately 70% of firms reported experiencing drawbacks from the BoJ's 25-year-long monetary easing measures, notably citing a weak JPY that increased import costs. However, around 90% of the firms also acknowledged benefits stemming from the BoJ's prolonged easing, including low borrowing costs. Among Japan's large manufacturers, exchange rate stability emerged as the primary factor they desired from the central bank's monetary policy.
Market sentiment emerges that the BoJ might reduce bond purchases at the June policy meeting. BOJ Governor Kazuo Ueda also indicated that there are no immediate plans to sell the central bank’s ETF holdings.

Technical Analysis: USD/JPY rises to a major level of 156.50

The USD/JPY pair trades around 156.30 on Wednesday. The daily chart for USD/JPY shows an ascending triangle formation. Additionally, the 14-day Relative Strength Index (RSI) indicated a bullish bias, slightly above the 50 mark.

The USD/JPY pair could retest the upper boundary of the ascending triangle near the psychological barrier at 157.00. A break above this level could propel the pair toward the high of 160.32, a level not seen since April 1990.

On the downside, the lower threshold of the ascending triangle provides immediate support around the major level of 155.50, followed by the 21-day Exponential Moving Average (EMA) at 155.33. A break below this level could exert downward pressure on the USD/JPY pair, potentially moving it toward the throwback support at 153.60.

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 New Zealand Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		0.05%	-0.16%	0.13%	0.10%	0.12%	-0.36%	0.14%
EUR	-0.05%		-0.24%	0.08%	0.06%	0.07%	-0.40%	0.10%
GBP	0.16%	0.22%		0.29%	0.27%	0.28%	-0.20%	0.31%
CAD	-0.13%	-0.11%	-0.29%		-0.10%	-0.01%	-0.51%	0.00%
AUD	-0.10%	-0.02%	-0.21%	0.06%		0.01%	-0.45%	0.08%
JPY	-0.12%	-0.05%	-0.26%	0.01%	0.01%		-0.47%	0.03%
NZD	0.35%	0.42%	0.22%	0.51%	0.45%	0.48%		0.54%
CHF	-0.15%	-0.10%	-0.31%	-0.02%	-0.08%	-0.03%	-0.53%

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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