- The Japanese Yen attracts some follow-through buying amid intervention fears.
- Bulls seem unaffected by data showing that Japan’s economy contracted in Q4.
- Delayed Fed rate cut bets favour the USD bulls and could lend support to USD/JPY.
The Japanese Yen (JPY) builds on the overnight recovery from a three-month low and trades with a positive bias for the second successive day against its American counterpart on Thursday. The post-US CPI rise in the USD/JPY pair, beyond the 150.00 psychological mark, prompted some verbal intervention from the Japanese authorities. This, along with geopolitical risks stemming from conflicts in the Middle East, overshadows the fact that the Japanese economy enters a technical recession in Q4 and underpins the JPY. In fact, provisional government data showed that Japan’s economy unexpectedly contracted again during the fourth quarter, fueling uncertainty about the likely timing of when the Bank of Japan (BoJ) will exit the negative interest rates policy.
The US Dollar (USD), on the other hand, stalls the overnight pullback from its highest level since November 14, though a further pullback in the US treasury bond yields acts as a headwind. Meanwhile, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer favours the USD bulls and assists the USD/JPY pair to hold above the 150.00 psychological mark through the Asian session. Traders now look to the US economic docket – featuring Retail Sales figures, regional manufacturing indices, the usual Weekly Initial Jobless Claims and Industrial Production data. Apart from this, the US bond yields will influence the USD, which, along with the broader risk sentiment, could produce short-term opportunities around the currency pair.
Daily Digest Market Movers: Japanese Yen remains on the front foot amid intervention fears and geopolitical risks
- Japan’s top currency diplomat Masato Kanda said on Wednesday that the nation would take appropriate actions on forex if needed, which is seen lending some support to the Japanese Yen.
- Provisional data released this Thursday showed that Japan’s GDP contracted by 0.4% during the October-December period, missing market expectations for a 1.4% growth by a huge margin.
- This comes on top of the previous quarter’s slump of 3.3%, confirming a technical recession and raising uncertainty about the Bank of Japan’s plans to exit its ultra-easy policy sometime this year.
- Japan’s Economic Minister Yoshitaka Shindo expect the BoJ to work closely with government, take appropriate monetary policy to sustainably, stably achieve its price target accompanied by wage rises.
- Furthermore, the overnight rebound in the US equity markets might contribute to capping the safe-haven JPY, which, along with a bullish US Dollar, should limit losses for the USD/JPY pair.
- The US inflation data for January released on Tuesday pushed back expectations for the first interest rate cut by the Federal Reserve to the middle of the year and should underpin the USD.
- Fed funds futures have priced out a rate cut in March and see a nearly 80% chance of easing at the June meeting, and about three rate cuts of 25 basis points each by the end of this year.
- The US Retail Sales figures for January are due for release later during the North American session, with consensus estimates pointing to a 0.1% fall as compared to a flat reading last month.
- Thursday’s US economic docket also features the Empire State Manufacturing Index, the Philly Fed Manufacturing Index, the usual Weekly Initial Jobless Claims and Industrial Production data.
Technical Analysis: USD/JPY slide below the 150.00 pivotal support might still be seen as a buying opportunity
From a technical perspective, the USD/JPY pair could find some support near the 150.00 psychological mark. Some follow-through selling has the potential to drag spot prices further towards the 149.65-149.60 region en route to the 149.25-149.20 area and the 149.00 round figure. The latter should act as a key pivotal point, which if broken decisively might prompt some technical selling and pave the way for some meaningful corrective decline.
On the flip side, the multi-month top, around the 150.85-150.90 region, touched on Tuesday, now seems to act as an immediate hurdle. A sustained strength beyond could lift the USD/JPY pair further towards the 151.45 intermediate hurdle en route to 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 | 0.04% | 0.03% | 0.05% | 0.31% | -0.21% | 0.15% | 0.05% | |
| EUR | -0.04% | -0.02% | 0.01% | 0.26% | -0.25% | 0.11% | 0.02% | |
| GBP | -0.03% | 0.00% | 0.01% | 0.26% | -0.25% | 0.11% | 0.02% | |
| CAD | -0.05% | 0.00% | -0.01% | 0.25% | -0.25% | 0.10% | 0.01% | |
| AUD | -0.29% | -0.26% | -0.26% | -0.26% | -0.52% | -0.16% | -0.24% | |
| JPY | 0.21% | 0.26% | 0.23% | 0.26% | 0.50% | 0.36% | 0.27% | |
| NZD | -0.15% | -0.10% | -0.11% | -0.10% | 0.15% | -0.35% | -0.09% | |
| CHF | -0.05% | -0.01% | -0.02% | 0.00% | 0.25% | -0.26% | 0.09% |
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).
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022.
Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency.
When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
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