- The Japanese Yen struggles for a firm intraday direction and oscillates in a range on Monday.
- Last week’s dovish remarks by BoJ’s Uchida and a positive risk tone cap the upside for the JPY.
- Sustained bets for a shift in the BoJ’s policy stance limit losses amid subdued USD price action.
- Traders now move to the sidelines and wait for this week’s release of key US inflation figures.
The Japanese Yen (JPY) kicks off the new week on a subdued note and oscillates in a narrow band against the US Dollar (USD), just above the YTD trough heading into the European session. Against the backdrop of a positive risk tone, the Bank of Japan (BoJ) Deputy Governor Shinichi Uchida’s dovish remarks last week, saying that aggressive tightening is unlikely even after an exit from negative interest rate policy, undermines the JPY. That said, expectations that another sizable wage increase by big Japanese firms could offer will support sustained and stable inflation, and allow the BoJ to pivot away from its ultra-loose policy settings in March or April to help limit losses for the JPY.
The USD, on the other hand, continues with its struggle to lure buyers in the wake of the uncertainty over the likely timing and pace of interest rate cuts by the Federal Reserve (Fed). This, in turn, does little to influence the USD/JPY pair, leading to a range-bound price action ahead of the key data risk – the release of the US consumer inflation figures on Tuesday. The crucial data should provide fresh cues about the Fed’s rate-cut path, which, in turn, will drive the USD demand and determine the near-term trajectory for the currency pair. In the meantime, spot prices seem more likely to prolong the consolidative price move in the absence of any relevant US macro data on Monday.
Daily Digest Market Movers: Japanese Yen struggles near YTD low amid mixed BoJ signals
- A combination of diverging forces fails to provide any meaningful impetus to the Japanese Yen on Monday amid relatively thin trading volumes and a holiday in Japan.
- The Bank of Japan (BoJ) Deputy Governor Shinichi Uchida said on Thursday that aggressive tightening is unlikely even after an exit from the negative interest rate policy.
- Uchida signalled a gradual move away from the current negative interest rate environment and said that the BoJ is not looking to make any drastic moves in the near future.
- This, along with a positive risk tone, undermines the safe-haven JPY, though firming expectations for an imminent shift in the BoJ’s policy stance helps limit deeper losses.
- Hopes that sizable wage increases by big Japanese firms this year will support sustained and stable inflation, allowing the BoJ to pivot away from its ultra-dovish policy.
- Federal Reserve officials continued to signal that the US central bank is in no rush to cut borrowing costs in the wake of a still resilient economy and sticky inflation.
- Dallas Fed Bank President Lorie Logan said on Friday that there is no urgency to cut rates and that she wants further evidence on inflation to confirm the progress is durable.
- Atlanta Fed President Raphael Bostic noted that inflation has been too high for too long, and there is still a way to go and that the US is on a path to pre-pandemic economic activity.
- The annual revisions published by the Labor Department on Friday showed that US consumer prices increased slightly more than previously reported in October and November.
- Investors also prefer to wait on the sidelines ahead of the release of the latest US consumer inflation figures on Tuesday, which might influence the Fed’s future policy decisions.
Technical Analysis: USD/JPY bulls have the upper hand while above 148.80 resistance breakpoint
From a technical perspective, last week’s breakout through the 148.80 multiple-tops resistance was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought zone. This, in turn, suggests that the path of least resistance for the USD/JPY pair remains to the upside. A subsequent move beyond the 149.55-149.60 area, or a multi-month peak touched on Friday, will reaffirm the constructive setup and lift spot prices to the 150.00 psychological mark. Some follow-through buying should pave the way for additional gains, towards the 150.35 intermediate hurdle en route to the 150.70 region and the 151.00 round figure.
On the flip side, the 148.80-148.70 resistance breakpoint might now protect the immediate downside ahead of the 148.25-148.20
region and the 148.00 mark. Any further decline might continue to attract some buyers and remain limited near the 100-day Simple Moving Average (SMA), currently pegged near the 147.65-147.60 zone. The latter should act as a key pivotal point, which if broken decisively could drag the USD/JPY pair to the 147.00 mark en route to the 146.35 region and the monthly swing low, around the 145.90 zone.
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 New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.01% | 0.02% | -0.01% | 0.01% | 0.19% | 0.02% | |
| EUR | -0.01% | -0.01% | -0.01% | -0.02% | -0.01% | 0.17% | 0.01% | |
| GBP | -0.01% | 0.01% | 0.02% | -0.01% | 0.00% | 0.18% | 0.01% | |
| CAD | -0.01% | 0.01% | 0.00% | -0.01% | 0.00% | 0.18% | 0.01% | |
| AUD | 0.00% | 0.02% | 0.01% | 0.01% | 0.01% | 0.19% | 0.02% | |
| JPY | -0.01% | 0.01% | 0.04% | -0.01% | -0.01% | 0.18% | -0.01% | |
| NZD | -0.19% | -0.17% | -0.18% | -0.19% | -0.19% | -0.18% | -0.17% | |
| CHF | -0.02% | 0.00% | -0.01% | -0.01% | -0.02% | -0.01% | 0.17% |
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).
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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