- The Japanese Yen strengthens a bit on Friday amid hawkish BoJ expectations.
- A weaker risk tone further benefits the JPY's safe-haven status against the USD.
- The JPY bulls seem unaffected by softer domestic Core CPI print and PMI data.
The Japanese Yen (JPY) recovers some of its losses against the US Dollar (USD) registered over the past three days and continues to draw support from rising bets for a shift in the Bank of Japan's (BoJ) policy stance. The expectations were reinforced by Japan's National CPI report released earlier this Friday, which showed that the headline and core rates of inflation remained above the BoJ's 2% target for the 19th consecutive month in October. Moreover, expectations are that another substantial round of pay hikes next year will support sustained and stable inflation. This could allow the BoJ to end its negative rate policy in 2024.
Apart from this, a generally weaker trading sentiment around the equity markets is seen benefitting the JPY's safe-haven status. This, along with a softer US Dollar (USD), drags the USD/JPY pair away from the weekly top touched on Thursday. Investors turn cautious amid the uncertainty over the Federal Reserve's (Fed) rate-hike path, which, in turn, is holding back traders from placing aggressive directional bets around the buck. That said, a goodish pickup is seen lending support to the Greenback and limiting the downside for the major ahead of the flash US PMIs, due later during the early North American session.
Daily Digest Market Movers: Japanese Yen snaps a three-day losing streak against the US Dollar
- Government data showed on Friday that the nationwide core Consumer Price Index (CPI), which excludes volatile fresh food costs, rose 2.9% year-on-year in October, slightly below the 3.0% expected.
- The reading, however, was well above the Bank of Japan's 2% annual target for more than a year now, indicating that inflationary pressures remained more stubborn than expected in the country.
- The narrower gauge of inflation, the so-called core-core index, which strips away fresh food and fuel costs, slowed from 4.2% in September to 4.0% during the reported month, though it remains close to a 40-year peak.
- The headline CPI accelerated from the 3% seen in the prior month, to the 3.3% YoY pace in October.
- Expectations that another substantial round of pay hikes next year will support sustained and stable inflation, reaffirms market bets for an imminent shift in the BoJ's policy stance.
- Growing acceptance that the Federal Reserve will not raise interest rates further continues to undermine the US Dollar and keeps a lid on any meaningful appreciating move for the USD/JPY pair.
- The flash Japan Manufacturing PMI slipped to 48.1 in November from the 48.7 previous. The index has remained below the 50.0 threshold that separates contraction from expansion since June.
- Investors now look forward to the flash US PMI prints, due for release later during the early North American session, for short-term trading opportunities on the last day of the week.
Technical Analysis: USD/JPY remains below the weekly peak touched on Thursday
From a technical perspective, move beyond the 149.75 area, or the weekly peak, is likely to confront some resistance near the 200-period Simple Moving Average (SMA) on the 4-hour chart. The said barrier is pegged near the 150.00 psychological mark, which is followed by the 100-period SMA on the 4-hour chart, currently near the 150.20 zone. A sustained strength beyond the latter will negate any near-term negative bias and lift the USD/JPY pair to the 151.00 mark. Bulls might eventually aim back towards challenging the YTD peak, just ahead of the 152.00 mark.
On the flip side, any meaningful slide might now find some support near the 149.00 mark. A convincing break below could drag the USD/JPY pair to the 148.35-148.30 region en route to the 148.00 round figure. Some follow-through selling will expose the monthly swing low, around the 147.15 region touched on Tuesday.
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 | -0.03% | -0.05% | 0.04% | -0.08% | -0.26% | -0.14% | -0.09% | |
| EUR | 0.03% | -0.01% | 0.08% | -0.05% | -0.22% | -0.10% | -0.07% | |
| GBP | 0.05% | 0.01% | 0.09% | -0.03% | -0.21% | -0.10% | -0.06% | |
| CAD | -0.04% | -0.08% | -0.09% | -0.13% | -0.30% | -0.18% | -0.14% | |
| AUD | 0.08% | 0.05% | 0.01% | 0.11% | -0.18% | -0.08% | -0.02% | |
| JPY | 0.25% | 0.22% | 0.19% | 0.29% | 0.17% | 0.12% | 0.15% | |
| NZD | 0.16% | 0.10% | 0.09% | 0.17% | 0.06% | -0.12% | 0.03% | |
| CHF | 0.10% | 0.06% | 0.05% | 0.14% | 0.02% | -0.17% | -0.04% |
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).
Inflation FAQs
What is inflation?
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
What is the Consumer Price Index (CPI)?
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
What is the impact of inflation on foreign exchange?
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
How does inflation influence the price of Gold?
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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