- 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 dovish 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 extends its consolidative price move for the second successive day on Monday, holding just below a multi-month low touched last week. The recent data showed that Japan’s economy unexpectedly entered a technical recession and fueled speculations that the Bank of Japan (BoJ) will delay its plans to pivot away from the ultra-lose monetary policy settings. This, along with the underlying bullish sentiment around the global equity markets, continues to undermine the safe-haven JPY.
Furthermore, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer assists the US Dollar (USD) to hold steady above a multi-week low touched last Thursday and acts as a tailwind for the USD/JPY pair. The markets have pushed back expectations for the first rate cut to June and also converged back to the Fed’s projected three 25 basis point (bps) cuts this year, which remains supportive of elevated US Treasury bond yields. The resultant widening of the US-Japan rate differential might also contribute to capping an attempted JPY recovery.
The upside for the USD/JPY pair, however, seems limited in the wake of speculations that Japanese authorities will intervene in the market to prop up the domestic currency. Traders might also prefer to wait for this week’s key US macro data, including the Core PCE Price Index, for cues about the Fed’s future policy decisions, which will influence the USD price dynamics and provide a fresh directional impetus to the currency pair. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices remains to the upside.
Daily Digest Market Movers: Japanese Yen is undermined by fading hopes for an imminent BoJ policy shift
- 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 needs to surpass multi-month peak set last week for bulls to regain near-term control
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).
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank’s massive stimulus 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. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
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