Japanese Yen flirts with weekly low against the US Dollar on softer Japan core CPI
- The Japanese Yen ticks lower on Friday in reaction to softer domestic data.
- The National core CPI fell below 3% in October for the first time in 13 months.
- The Japan Manufacturing PMI remains below 50 for the sixth straight month.
The Japanese Yen (JPY) weakens a bit during the Asian session on Friday following the release of softer domestic core consumer inflation figures, though rising bets for a Bank of Japan (BoJ) pivot help limit deeper losses. The headline and core rates of inflation in Japan have been above the BoJ’s 2% target for more than a year now. Adding to this, another substantial round of pay hikes next year by Japanese firms could fuel consumer spending and demand-driven inflation. This has been fueling speculations that the BoJ will certainly end its negative rate policy in the first few months of 2024.
The USD/JPY pair, meanwhile, remains below the weekly top despite the disappointing release of the au Jibun Bank flash Japan Manufacturing PMI, which remained in contraction territory for the sixth successive month in November. The upside, however, remains capped in the wake of a mildly softer tone surrounding the US Dollar (USD). Growing acceptance that the Federal Reserve (Fed) is done raising interest rates and could start cutting rates during the first half of 2024 keeps the USD bulls on the defensive just above its lowest level since August 31 touched earlier this week.
Daily Digest Market Movers: Japanese Yen ticks lower in reaction to softer domestic data, hawkish BoJ bets limit losses
- Government data showed on Friday that the nationwide core Consumer Price Index (CPI), which excludes volatile fresh food costs, rose 2.9% year-on-year in October, slightly below the 3.0% expected.
- The reading, however, was well above the Bank of Japan’s 2% annual target for the 19th consecutive month, indicating that inflationary pressures remained more stubborn than expected in the country.
- The narrower gauge of inflation, the so-called core-core index, which strips away fresh food and fuel costs, slowed from 4.2% in September to 4.0% during the reported month, though it remains close to a 40-year peak.
- The headline CPI accelerated from the 3% seen in the prior month, to the 3.3% YoY pace in October.
- This, along with expectations that another substantial round of pay hikes next year will support sustained and stable inflation, reaffirms market bets for an imminent shift in the BoJ’s policy stance.
- Growing acceptance that the Federal Reserve will not raise interest rates further continues to undermine the US Dollar and keeps a lid on any meaningful appreciating move for the USD/JPY pair.
- The flash Japan Manufacturing PMI slipped to 48.1 in November from the 48.7 previous. The index has remained below the 50.0 threshold that separates contraction from expansion since June.
- Investors now look forward to the flash US PMI prints, due for release later during the early North American session, for short-term trading opportunities on the last day of the week.
Technical Analysis: USD/JPY remains below the 150.00 psychological mark or the 200-period SMA on H4
From a technical perspective, move beyond the 149.75 area, or the weekly peak, is likely to confront some resistance near the 200-period Simple Moving Average (SMA) on the 4-hour chart. The said barrier is pegged near the 150.00 psychological mark, which is followed by the 100-period SMA on the 4-hour chart, currently near the 150.20 zone. A sustained strength beyond the latter will negate any near-term negative bias and lift the USD/JPY pair to the 151.00 mark. Bulls might eventually aim back towards challenging the YTD peak, just ahead of the 152.00 mark.
On the flip side, any meaningful slide might now find some support near the 149.00 mark. A convincing break below could drag the USD/JPY pair to the 148.35-148.30 region en route to the 148.00 round figure. Some follow-through selling will expose the monthly swing low, around the 147.15 region touched on Tuesday.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.02% | 0.01% | 0.01% | -0.02% | -0.02% | -0.03% | -0.03% | |
| EUR | -0.01% | 0.00% | -0.01% | 0.00% | -0.03% | -0.04% | -0.05% | |
| GBP | -0.02% | 0.00% | -0.01% | -0.01% | -0.03% | -0.05% | -0.06% | |
| CAD | -0.03% | -0.01% | -0.03% | -0.04% | -0.04% | -0.06% | -0.08% | |
| AUD | -0.02% | 0.00% | -0.02% | 0.00% | -0.03% | -0.07% | -0.06% | |
| JPY | 0.02% | 0.04% | 0.00% | 0.04% | 0.03% | -0.01% | -0.02% | |
| NZD | 0.06% | 0.05% | 0.04% | 0.06% | 0.05% | 0.02% | 0.00% | |
| CHF | 0.03% | 0.05% | 0.04% | 0.07% | 0.04% | 0.01% | -0.01% |
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
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.
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.
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.
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.