Japanese Yen rebounds from one-week low, upside potential seems limited
- The Japanese Yen attracts some buyers amid geopolitical risks and intervention fears.
- Fading hopes for an imminent shift in the BoJ’s policy stance might cap further gains.
- The Fed’s higher-for-longer narrative underpins the USD and lends support to USD/JPY.
The Japanese Yen (JPY) ticks higher against its American counterpart during the Asian session on Friday and for now, seems to have snapped a two-day losing streak to over a one-week low touched the previous day. The recent verbal intervention by Japanese authorities and persistent geopolitical tensions turn out to be key factors lending some support to the safe-haven JPY. That said, any meaningful appreciating move still seems elusive in the wake of bets for a delay in the Bank of Japan’s (BoJ) plans to end its ultra-loose policies, bolstered by data showing that Japan’s economy fell into a technical recession in the fourth quarter.
In contrast, the minutes of the late January FOMC meeting revealed that policymakers are in no rush to cut interest rates amid sticky inflation and the still-resilient US economy. This remains supportive of elevated US Treasury bond yields, which, along with Thursday’s mostly upbeat US macro data, could assist the US Dollar (USD) to build on the overnight solid rebound from a nearly three-week low. Apart from this, the prevalent risk-on environment – as depicted by an extended rally across the global equity markets – might cap gains for the JPY and suggests that the path of least resistance for the USD/JPY pair is to the upside.
Daily Digest Market Movers: Japanese Yen struggles to lure buyers amid BoJ policy uncertainty
- Attacks on commercial vessels in the Red Sea by Yemen’s Iran-aligned Houthi rebels show no sign of abating despite US and UK strikes, raising the risk of further military action and benefiting the safe-haven Japanese Yen.
- Japan’s Ministry of Finance and the Bank of Japan recently warned that they’re watching the exchange rate closely and are willing to intervene in the market to stem any further weakness in the domestic currency.
- Data released last week showed that Japan’s economy unexpectedly entered a technical recession during the fourth quarter, fuelling speculations that the BoJ might delay its plans to exit the ultra-easy policy regime.
- On the other hand, the FOMC meeting minutes on Wednesday, along with comments by a slew of influential Federal Reserve officials, reiterated the message that the central bank will keep interest rates higher for longer.
- Fed Vice Chair Philip Jefferson said on Thursday that he was cautiously optimistic about progress on inflation and that he will be looking at the totality of data when weighing interest rate cut options, not a single indicator.
- Separately, Philadelphia Fed President Patrick Harker noted that the central bank is approaching the point of cutting interest rates, though policymakers remain unsure of when specifically, that might happen.
- Furthermore, Fed Governor Lisa Cook believes that the current monetary policy stance is restrictive and would like to have greater confidence that inflation is converging to 2% before beginning interest rate cuts.
- Meanwhile, Fed Governor Christopher Waller expects the FOMC to begin lowering at some point this year, but he will need more evidence to see that inflation is cooling before he is willing to support interest rate cuts.
- According to the CME FedWatch Tool, the current market pricing indicates about a 30% chance that the Fed will start cutting interest rates in May, much lower than a more than over 80% chance a month ago.
- Adding to this, fresh signs of strength in the US labor market remain supportive of elevated US Treasury bond yields, which favours the US Dollar bulls and should lend some support to the USD/JPY pair.
- The US Department of Labor reported that the number of Americans applying for unemployment insurance benefits declined to 201K during the week ending February 17 from the 213K in the previous week.
- The better-than-expected release of the flash PMI prints showed that the downturn in the Eurozone business activity eased in February, which further boosted investors’ sentiment and should cap gains for the JPY.
Technical Analysis: USD/JPY bulls need to wait for move beyond 150.90 before placing fresh bets
From a technical perspective, any meaningful pullback is likely to find decent support near the 150.00 psychological mark. This is followed by the weekly low, around the 149.70-149.65 region, which if broken could drag the USD/JPY pair further towards the 149.35-149.30 horizontal support en route to the 149.00 mark. Some follow-through selling below the 148.80-148.70 strong horizontal resistance breakpoint might shift the bias in favour of bearish traders and pave the way for deeper losses.
On the flip side, bulls might still wait for a sustained strength beyond the 150.85-150.90 area, or a multi-month top touched last week, before placing fresh bets. Given that oscillators on the daily chart are holding comfortably in the positive territory and are still away from being in the overbought zone, the USD/JPY pair might then climb to the 151.45 hurdle. The momentum could extend towards 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 strongest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.06% | -0.02% | 0.00% | -0.20% | -0.04% | -0.07% | 0.02% | |
| EUR | 0.05% | 0.03% | 0.05% | -0.14% | 0.01% | -0.02% | 0.05% | |
| GBP | 0.02% | -0.04% | 0.02% | -0.18% | -0.02% | -0.05% | 0.01% | |
| CAD | 0.00% | -0.06% | -0.03% | -0.20% | -0.03% | -0.08% | -0.01% | |
| AUD | 0.20% | 0.14% | 0.18% | 0.20% | 0.16% | 0.10% | 0.18% | |
| JPY | 0.03% | -0.01% | 0.04% | 0.04% | -0.16% | -0.03% | 0.04% | |
| NZD | 0.06% | 0.02% | 0.05% | 0.08% | -0.13% | 0.04% | 0.08% | |
| CHF | -0.01% | -0.07% | -0.03% | -0.01% | -0.22% | -0.05% | -0.11% |
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.