- After the Bank of Japan announced its policy decision, the Japanese yen depreciated across the board.
- The Bank of Japan raised interest rates for the first time since 2007 and also abolished the YCC policy.
- Hawkish expectations from the Fed push the USD to a two-week high, supporting USD/JPY.
The Japanese Yen (JPY) saw typical news-selling trading after the Bank of Japan (BoJ) announced its first interest rate hike since 2007 and the end of its Yield Curve Control (YCC) policy this Tuesday. . In an accompanying policy statement, the Bank of Japan indicated that monetary policy would remain accommodative for now, but did not provide any guidance on future policy measures or the pace of normalization.
Following Bank of Japan Governor Kazuo Ueda’s comments, the yen-selling bias remains unabated, and combined with broad-based US dollar (USD) strength, pushed the USD/JPY pair to around 150.50 in early European trading. With the recent gains, the pair has reversed much of the corrective decline recorded over the past two weeks and is now back in a position close to its year-to-date highs reached in February.
Daily Digest Market Movers: Japanese yen falls despite first BOJ interest rate hike since 2007
- The Japanese yen depreciated across the board after the Bank of Japan announced plans to raise short-term interest rates by 10 basis points and gradually reduce purchases of commercial paper and corporate bonds.
- The Bank of Japan also decided to abolish its yield curve control policy, but said it would continue to purchase Japanese government bonds at a steady pace and intervene as necessary if yields rise too high.
- The move comes days after Japan’s biggest companies agreed to their biggest wage hikes in 33 years, data showed inflation remained sticky and the economy avoided recession in the fourth quarter. I was disappointed.
- Japan’s Finance Minister Shunichi Suzuki said this year’s wage negotiations have yielded record wage increases so far, and the government will roll out a range of policies to ensure the positive momentum in wages continues.
- Bank of Japan Governor Kazuo Ueda told a press conference after the meeting that the Bank of Japan would continue purchasing government bonds at “roughly the same amount” as before and would consider a wide range of easing options, including those implemented in the past, if necessary. Ta.
- After better-than-expected U.S. producer and consumer price data released last week, investors are betting on more aggressive policy easing from the Federal Reserve, which continues to support the dollar. We were forced to scale back our bets.
- Markets are currently pricing in fewer than three 25 basis point rate cuts in 2024, with a roughly 51% chance that the Fed will begin a rate cut cycle at its June policy meeting, significantly lower than expected at the beginning of the year. are doing.
- Expectations that the Federal Reserve will keep interest rates high for an extended period of time have pushed the benchmark 10-year US Treasury yield to its highest level in three weeks, further strengthening the US dollar and forecasting a further rise in the US dollar/yen pair. Supporting.
- However, traders were reluctant to bet on anything positive ahead of the highly anticipated Bank of Japan policy decision on Tuesday, followed by the outcome of the two-day FOMC meeting on Wednesday. ing.
Technical Analysis: USD/JPY looks poised to challenge year-to-date highs and conquer the 151.00 mark
From a technical perspective, the sustained strength above the 61.8% Fibonacci retracement level and the psychological mark 150.00 during the February-March decline could be seen as a new trigger for bullish traders. be. Furthermore, the oscillator on the daily chart has just started gaining positive traction, suggesting that the path of least resistance for the USD/JPY pair is to the upside. Therefore, the possibility of some follow-through strength returning towards the 151.00 area, or the year-to-date peak reached in February, seems clear. Sustaining strength above the latter could trigger fresh short-covering activity and pave the way for an extension of the uptrend that has lasted for more than a week.
On the contrary, the 150.00 mark currently appears to be protecting the near-term downside. Any subsequent decline is likely to attract new buyers and remain limited around the 149.20 area. If the follow-through selling continues below the 149.00 mark, the bias will shift in favor of bearish traders and the USD/JPY pair could be pulled further towards the 148.30 area on its way to the 148.00 mark and the 100-day simple moving average. There is sex. (SMA), currently anchored around the 147.65 region.
