- The Japanese Yen recovers a bit from the YTD low amid the BoJ’s hawkish tilt and geopolitical risks.
- The USD stalls the post-NFP rally to a nearly two-month peak and acts as a headwind for USD/JPY.
- Rising US bond yields favour the USD bulls and support prospects for a further move up for the pair.
The Japanese Yen (JPY) touches a fresh YTD low against its American counterpart during the Asian session on Monday, albeit lacks follow-through selling in the wake of the Bank of Japan’s (BoJ) hawkish tilt. Meanwhile, investors remain worried about the risk of a further escalation of geopolitical tensions in the Middle East. This, along with the continued weakness in the Chinese economy, tempers investors’ appetite for riskier assets and benefits the JPY’s relative safe-haven status. The US Dollar (USD), on the other hand, eases from its highest level since December 11 and turns out to be another factor capping the upside for the USD/JPY pair.
That said, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer should act as a tailwind for the buck. In fact, the markets further scaled back bets for a more aggressive policy easing by the US central bank in reaction to Friday’s stellar employment details. This remains supportive of elevated US Treasury bond yields, which favours the USD bulls and supports prospects for a further near-term appreciating move for the USD/JPY pair. Traders now look to the release of the US ISM Services PMI, which, along with the US bond yields, the USD price dynamics and the broader risk sentiment, should provide a fresh impetus.
Daily Digest Market Movers: Japanese Yen draws support from geopolitical tensions and BoJ’s hawkish tilt
- China’s pledge to stabilise markets comes on top of the upbeat US employment details on Friday, which pointed to a resilient economy, and boosts investors’ confidence, undermining the safe-haven Japanese Yen.
- China Securities Regulatory Commission said on Sunday that it would guide more medium- and long-term funds into the market and crack down on illegal activities including malicious short selling and insider trading.
- The headline NFP showed that the US economy added 353K jobs in January, smashing market expectations for 180K, and the previous month’s reading was also revised higher to 333K from 216K reported initially.
- Other details revealed that the Unemployment Rate held steady at 3.7% and wage inflation, as measured by the change in Average Hourly Earnings, rose to 4.5% on a yearly basis as against the 4.1% rise anticipated.
- The data dimmed hopes for a near-term rate cut by the Federal Reserve, with the probability of such a move at the May FOMC meeting now standing at about 70%, down from 90% before the crucial jobs report.
- Expectations that the Fed will keep interest rates higher for longer continue to push the US Treasury bond yields higher, lifting the US Dollar to a near two-month top and lending support to the USD/JPY pair.
- A survey on Monday showed that business activity in Japan’s services sector, which accounts for around 70% of the country’s gross domestic product (GDP), expanded at the strongest pace since September.
- In fact, the au Jibun Bank Service PMI was revised up and finalized at 53.1 for January, marking the 17th consecutive month of growth, as against the flash reading of 52.7 and 51.5 in the previous month.
- The Bank of Japan has become more bullish on its inflation outlook due to rising momentum for wage increases and growth in service sector prices, strengthening the case for an imminent exit from negative interest rates.
- Media reports suggest that Hamas is set to reject the Gaza ceasefire deal proposed in Paris and Israel’s Prime Minister Benjamin Netanyahu said that the country will not end the war before it completes all of its goals.
- The US ISM Services PMI is due for release later today and is expected to improve from 50.6 to 52.0 in January, which, along with the US bond yields and the broader risk sentiment, should provide some impetus.
Technical Analysis: USD/JPY bulls struggle to make it through 148.75-148.80 multiple-tops resistance
From a technical perspective, the USD/JPY pair needs to make it through the 148.75-148.80 multiple-tops resistance for bulls to seize near-term control. Given that oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone, some follow-through buying beyond the 149.00 round figure will be seen as a fresh trigger for spot prices. The subsequent move up should allow bulls to aim back to reclaim the 150.00 psychological mark with some intermediate resistance near the 149.60-149.70 region.
On the flip side, the 148.00 mark now seems to protect the immediate downside. Any further decline is more likely to attract fresh buyers and remain limited near the 100-day Simple Moving Average (SMA), currently pegged near the 147.60-147.55 zone. A convincing break below the latter, however, might prompt aggressive technical selling and drag the USD/JPY pair below the 147.00 mark, towards the next relevant support near the 146.75-146.70 region. The downfall could extend further towards the 146.40 zone en route to sub-146.00 levels, or last week’s swing low.
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 | 0.03% | 0.11% | 0.05% | -0.01% | -0.05% | 0.06% | 0.08% | |
| EUR | -0.02% | 0.10% | 0.03% | -0.03% | -0.08% | 0.02% | 0.06% | |
| GBP | -0.11% | -0.08% | -0.06% | -0.13% | -0.16% | -0.07% | -0.04% | |
| CAD | -0.05% | -0.01% | 0.06% | -0.06% | -0.10% | -0.01% | 0.02% | |
| AUD | 0.01% | 0.05% | 0.13% | 0.07% | -0.04% | 0.07% | 0.08% | |
| JPY | 0.04% | 0.07% | 0.15% | 0.12% | 0.05% | 0.08% | 0.12% | |
| NZD | -0.07% | -0.01% | 0.07% | 0.01% | -0.07% | -0.12% | 0.02% | |
| CHF | -0.06% | -0.03% | 0.05% | -0.02% | -0.06% | -0.11% | 0.00% |
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).
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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