- The Japanese Yen gains positive traction on Thursday and snaps a two-day losing streak.
- The Fed rate-cut uncertainty keeps the USD bulls on the defensive and benefits the JPY.
- Traders might refrain from placing fresh directional bets ahead of the key US CPI report.
The Japanese Yen (JPY) atracts some buyers during the Asian session on Thursday and reverses a part of the previous day’s slide back closer to the monthly low against the US Dollar (USD). In the absence of any fresh fundamental trigger, the intraday uptick could be attributed to some repositioning trade ahead of the US consumer inflation figures, due later today. The crucial US Consumer Price Index (CPI) report should provide some clarity about the Federal Reserve’s (Fed) rate-cut path, which, in turn, will drive the USD demand and provide a fresh directional impetus to the USD/JPY pair.
In the meantime, the uncertainty over the likely speed and magnitude of the interest rate cuts by the Fed fails to provide any meaningful impetus to the USD. That said, growing acceptance that the Bank of Japan (BoJ) is unlikely to alter its ultra-dovish policy setting in January – amid the recent devastating earthquake in Japan, falling rates of inflation in Tokyo and weak wage data – should cap gains for the JPY. This, along with the upbeat market mood, which tends to undermine demand for the safe-haven JPY, should contribute to limiting any further downside for the USD/JPY pair.
Daily Digest Market Movers: Japanese Yen strengthens against USD amid some repositioning ahead of US CPI
- The Japanese Yen attracts some buyers on Thursday as traders opt to lighten their bearish bets and prefer to wait for the release of the latest US consumer inflation figures later during the North American session.
- The headline US CPI is expected to rise by 0.2% in December, lifting the yearly rate to 3.2% from 3.1%, while the core gauge (excluding food and energy prices) is anticipated to ease to 3.8% YoY from 4.0% previous.
- The crucial inflation data will play a key role in influencing the Fed’s future policy decisions amid the uncertainty over the timing of the first interest rate cut and drive the US Dollar demand in the near term.
- Japan’s Labour Ministry reported on Wednesday that inflation-adjusted real wages fell by 3.0% in November from a year earlier and nominal pay grew by 0.2% in November – the slowest in nearly two years.
- Data released on Tuesday showed that Tokyo’s core CPI decelerated to the 2.1% YoY rate in December and matched a low hit in June 2022, dampening hopes for a hawkish pivot by the Bank of Japan.
- The BoJ regards wage trends and inflation outlooks as key factors in considering the dismantling of its negative rate policy.
- A generally positive tone around the equity markets could further undermine the JPY’s relative safe-haven status and help limit any meaningful downside for the USD/JPY pair ahead of the key US data risk.
Technical Analysis: USD/JPY corrects from the vicinity of monthly top, 145.00 holds the key for bulls
From a technical perspective, the recent repeated failures ahead of the 146.00 mark make it prudent to wait for a sustained strength beyond the said handle before positioning for any further gains. Given that oscillators on the daily chart have just started gaining positive traction, the USD/JPY pair might then climb to the 146.55-146.60 hurdle. The momentum could extend further towards the 147.00 mark, above which bulls might aim to challenge the 100-day Simple Moving Average (SMA), currently around the 147.45-147.50 region.
On the flip side, any further decline might now attract fresh buyers and remain limited near the 145.00 psychological mark. That said, a convincing break below will expose the next relevant support near the 144.65 horizontal zone. This is followed by the 144.20 area and the 144.00 round-figure mark, below which the USD/JPY pair could slide to the 200-day SMA, currently near the 143.45-143.40 region. Some follow-through selling will shift the near-term bias back in favour of bearish traders and drag spot prices below the 143.00 mark, towards the 142.45 support.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.02% | -0.10% | -0.08% | -0.17% | -0.17% | -0.17% | -0.09% | |
| EUR | 0.02% | -0.09% | -0.07% | -0.15% | -0.15% | -0.16% | -0.06% | |
| GBP | 0.08% | 0.08% | 0.01% | -0.07% | -0.07% | -0.09% | 0.02% | |
| CAD | 0.08% | 0.06% | -0.02% | -0.09% | -0.08% | -0.09% | 0.00% | |
| AUD | 0.17% | 0.16% | 0.09% | 0.10% | 0.02% | 0.00% | 0.09% | |
| JPY | 0.17% | 0.15% | 0.06% | 0.07% | -0.01% | -0.02% | 0.07% | |
| NZD | 0.17% | 0.18% | 0.08% | 0.09% | 0.00% | 0.00% | 0.11% | |
| CHF | 0.08% | 0.06% | -0.02% | 0.00% | -0.09% | -0.09% | -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).
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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