Japanese Yen holds losses as traders adopt caution ahead of US GDP Annualized

The Japanese Yen receives downward pressure as traders expect the BoJ to delay further rate hikes.
The BoJ Meeting Minutes highlighted a consensus among members on the need to remain vigilant regarding inflation risks.
Traders await US Gross Domestic Product Annualized for the second quarter, scheduled for Thursday.

The Japanese Yen (JPY) remains subdued against the US Dollar (USD) following the Bank of Japan’s (BoJ) minutes from its July policy meeting released on Thursday. The JPY faces challenges as traders expect the BoJ to ponder before further rate hikes.

The BoJ Monetary Policy Meeting Minutes expressed the members’ consensus on the importance of remaining vigilant regarding the risks of inflation exceeding targets. Several members indicated that raising rates to 0.25% would be suitable as a way to adjust the level of monetary support. A few others suggested that a moderate adjustment to monetary support would also be appropriate.

The US Dollar receives downward pressure from rising odds of further interest rate cuts by the US Federal Reserve (Fed) in upcoming policy meetings. According to the CME FedWatch Tool, markets are pricing in around a 50% chance of totaling 75 basis points to be deducted by the Fed to a range of 4.0-4.25% by the end of this year.

Traders are now focused on the release of the final US Gross Domestic Product (GDP) Annualized for the second quarter (Q2) scheduled to be released later in the day. Tokyo’s inflation data will be eyed on Friday, which may provide further guidance on the economic outlook and potential monetary policy moves by the Bank of Japan.

Daily Digest Market Movers: Japanese Yen depreciates due to concerns over BoJ delaying rate hikes

Federal Reserve Governor Adriana Kugler said on Wednesday that she “strongly supported” the Fed’s decision to cut the interest rates by a half point last week. Kugler further stated that it will be appropriate to make additional rate cuts if inflation continues to ease as expected, per Bloomberg.
Federal Reserve Governor Michelle Bowman stated on Tuesday that key inflation indicators are still "uncomfortably above" the 2% target, urging caution as the Fed moves forward with interest rate cuts. Despite this, she expressed a preference for a more conventional approach, advocating for a quarter percentage point reduction.
US Consumer Confidence Index fell to 98.7 in September from a revised 105.6 in August. This figure registered the biggest decline since August 2021.
On Tuesday, BoJ Governor Kazuo Ueda indicated that the central bank has time to evaluate market and economic conditions before making any policy adjustments, signaling that there is no urgency to raise interest rates again. Ueda also noted that Japan's real interest rate remains deeply negative, which is helping to stimulate the economy and drive up prices.
Minneapolis Fed President Neel Kashkari said on Monday that he believes there should be and will be additional interest rate cuts in 2024. However, Kashkari expects future cuts to be smaller than the one from the September meeting, per Reuters.
Chicago Fed President Austan Goolsbee noted, “Many more rate cuts are likely needed over the next year, rates need to come down significantly.” Additionally, Atlanta Fed President Raphael Bostic said that the US economy is close to normal rates of inflation and unemployment and the central bank needs monetary policy to "normalize" as well, per Reuters.
On Monday, Japan's new "top currency diplomat," Atsushi Mimura, stated in an interview with NHK that the Yen carry trades accumulated in the past have likely been mostly unwound. Mimura cautioned that if such trades were to increase again, it could lead to heightened market volatility. "We are always monitoring the markets to ensure that does not happen," he added.

Technical Analysis: USD/JPY breaks above the descending channel to near 145.00

USD/JPY trades around 145.00 on Thursday. Analysis of the daily chart shows that the pair has breached above the descending channel, indicating a potential for a weakening of bearish bias. Additionally, the 14-day Relative Strength Index (RSI) has moved above the 50 level, suggesting a momentum shift to bullish from bearish sentiment.

On the upside, the USD/JPY pair may explore the region around its six-week high of 149.40.

In terms of support, the USD/JPY pair may test the immediate upper boundary of the descending channel, around the 144.00 level, followed by the nine-day Exponential Moving Average (EMA) at the level of 143.62. A return to the descending channel would reinforce the bearish bias and lead the pair to target the 139.58 region, the lowest point since June 2023.

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 Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.08%	-0.22%	0.06%	-0.14%	-0.67%	-0.41%	-0.10%
EUR	0.08%		-0.15%	0.15%	-0.06%	-0.59%	-0.34%	-0.02%
GBP	0.22%	0.15%		0.29%	0.10%	-0.44%	-0.20%	0.14%
JPY	-0.06%	-0.15%	-0.29%		-0.17%	-0.73%	-0.48%	-0.15%
CAD	0.14%	0.06%	-0.10%	0.17%		-0.53%	-0.27%	0.05%
AUD	0.67%	0.59%	0.44%	0.73%	0.53%		0.27%	0.58%
NZD	0.41%	0.34%	0.20%	0.48%	0.27%	-0.27%		0.32%
CHF	0.10%	0.02%	-0.14%	0.15%	-0.05%	-0.58%	-0.32%

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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (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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