Japanese Yen bears retain control near YTD low, focus shifts to next week's US CPI

The Japanese Yen continues to be undermined by dovish BoJ remarks on Thursday.
The Fed rate cut uncertainty keeps the USD bulls on the defensive and caps gains.
Traders also prefer to wait for the US consumer inflation figures, due next week.

The Japanese Yen (JPY) remains on the back foot against its American counterpart and hit a fresh YTD low during the early part of the European session on Friday. The Bank of Japan (BoJ) Deputy Governor Uchida Shinichi's dovish remarks on Thursday, saying that the central bank will not hike aggressively upon ending negative rates, continue to undermine the safe-haven JPY. Apart from this, a generally positive tone around the equity markets is seen as another factor denting the JPY's relative safe-haven status and acting as a tailwind for the USD/JPY pair.

Bulls, meanwhile, fail to gain any respite from subdued US Dollar (USD) price action, led by the uncertainty over the likely timing and pace of interest rate cuts by the Federal Reserve (Fed) in 2024. This might hold back traders from positioning for any further appreciating move for the USD/JPY pair ahead of next week's key data risk. The crucial US consumer inflation figures will play a key role in influencing the Fed's future policy decision, which, in turn, will drive the sentiment surrounding the Greenback and provide a fresh directional impetus to the currency pair.

Daily Digest Market Movers: Japanese Yen is weighed down by dovish BoJ remarks

The Japanese Yen witnessed aggressive selling on Thursday and tumbled to a fresh YTD low against the US Dollar in reaction to Bank of Japan Deputy Governor Shinichi Uchida's dovish remarks.
In a press release, Uchida signalled a gradual move away from the current negative interest rate environment and said that the BoJ is not looking to make any drastic moves in the near future.
Chief Cabinet Secretary Yoshimasa Hayashi said this Friday that it is up to the BoJ to decide monetary policy details and Uchida's comments were the same as Governor Ueda made at the last meeting.
Japanese Finance Minister Shunichi Suzuki said that specific monetary policy is up to the BoJ to decide and that it is important for currencies to move in a stable manner, reflecting fundamentals.
Robust US macro data, along with the recent hawkish comments by several Federal Reserve officials, forced investors to scale back their expectations for early and steep interest rate cuts this year.
Richmond Fed Thomas Barkin said on Thursday that the central bank has time to be patient on rate changes and that he needs to see good inflation numbers being sustained and broadening.
Barkin further added that the labour market remains vibrant and it is hard to determine the appropriate course of action for rates based solely on economic models.
The yield on the benchmark 10-year US government bond holds comfortably above 4.0%, though does little to impress the US Dollar bulls or provide any meaningful impetus to the USD/JPY pair.
Traders now seem reluctant to place aggressive bets and prefer to wait for the release of next week's US consumer inflation figures for fresh cues about the Fed's future policy decision.

Technical Analysis: USD/JPY bulls might aim to reclaim 150.00 psychological mark

From a technical perspective, the overnight breakout through the 148.80 horizontal barrier was seen as a fresh trigger for bullish traders and might have already set the stage for additional gains. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and are still away from being in the overbought zone. This further validates the constructive set-up and suggests that the path of least resistance for the USD/JPY pair is to the upside. Hence, a subsequent strength towards reclaiming the 150.00 psychological mark, for the first time since November 17, looks like a distinct possibility. Some follow-through buying should pave the way for an extension of the recent uptrend witnessed since the beginning of this year.

On the flip side, any meaningful corrective decline now seems to find decent support near the 149.00 mark ahead of the 148.80 strong resistance breakpoint. The latter should act as a key pivotal point, which if broken decisively might prompt some technical selling and drag the USD/JPY pair back to the 148.00 round figure. The downward trajectory could get extended further towards testing the 100-day Simple Moving Average (SMA), around the 147.60 region. Failure to defend the latter will negate the positive outlook and shift the near-term bias in favour of bearish traders.

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		0.00%	0.00%	0.01%	0.06%	0.00%	-0.24%	0.01%
EUR	0.00%		0.00%	0.01%	0.06%	0.01%	-0.25%	0.01%
GBP	0.00%	-0.01%		0.02%	0.06%	0.01%	-0.24%	0.02%
CAD	-0.02%	-0.02%	-0.02%		0.04%	-0.02%	-0.26%	0.00%
AUD	-0.06%	-0.07%	-0.06%	-0.05%		-0.06%	-0.30%	-0.03%
JPY	-0.01%	-0.01%	0.01%	0.00%	0.03%		-0.23%	0.02%
NZD	0.24%	0.23%	0.23%	0.24%	0.29%	0.24%		0.25%
CHF	-0.04%	-0.04%	-0.04%	-0.03%	0.02%	-0.03%	-0.28%

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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