- The Japanese yen is under downward pressure as traders assess the Bank of Japan's policy outlook.
- Bank of Japan Governor Ueda suggested the bank would assess market and economic conditions before making any policy adjustments, suggesting there is no urgency to raise interest rates.
- The US Dollar is facing difficulties due to rising dovish sentiment around the outlook for US Federal Reserve policy.
The Japanese Yen (JPY) weakened slightly against the US Dollar (USD) on Wednesday as investors assessed the outlook for the Bank of Japan's (BoJ) monetary policy. On Tuesday, BOJ Governor Kazuo Ueda suggested the central bank has time to assess market and economic conditions before making any policy adjustments, suggesting there is no urgency to raise interest rates again.
Bank of Japan Governor Kazuo Ueda also noted that Japan's real interest rates remain at a deep negative level, which is helping to stimulate the economy and push up prices. Furthermore, Finance Minister Shunichi Suzuki said he expects the Bank of Japan to take appropriate monetary policy measures in close coordination with the government.
Traders are now focusing on the minutes of the Bank of Japan's monetary policy meeting on Thursday, followed by inflation data from Tokyo on Friday, for further guidance on the economic outlook and monetary policy movements.
The USD/JPY pair came under downward pressure as the US Dollar weakened following a drop in the US consumer confidence index released on Tuesday, leading to a more dovish view on upcoming monetary policy decisions by the Federal Reserve (Fed).
Daily Digest Market Trends: Japanese yen remains weak amid confusion over Bank of Japan's policy outlook
- Federal Reserve Governor Michelle Bowman urged caution as the central bank moves ahead with rate cuts, saying on Tuesday that key inflation measures remain “uncomfortably above” its 2% target. Nevertheless, governors preferred a more traditional approach and argued for a 0.25% cut.
- The U.S. consumer confidence index fell to 98.7 in September from a revised 105.6 in August. The reading marked the biggest drop since August 2021.
- Jibun Bank's Japan Composite Purchasing Managers' Index (PMI) fell to 52.5 in September from a 15-month high of 52.9 in August. Despite the decline, private sector activity has increased for eight consecutive months this year, driven mainly by the services sector. The services sector PMI rose to 53.9 in September from a final reading of 53.7 in the previous month.
- The S&P Global U.S. Composite PMI showed growth slowing in September, falling to 54.4 from 54.6 in August. The manufacturing PMI unexpectedly fell to 47.0, indicating a contraction, while the services PMI expanded more than expected, reaching 55.4.
- Minneapolis Federal Reserve Bank President Neel Kashkari said on Monday he believes additional interest rate cuts should and will come in 2024. However, he expects future cuts to be smaller than the one at the September meeting, according to Reuters.
- “We're likely going to need to cut rates further over the next year. Interest rates need to come down significantly,” Chicago Fed President Austen Goolsby said. Additionally, Atlanta Fed President Raphael Bostic said on Monday that the U.S. economy is approaching normal levels of inflation and unemployment, and the central bank also needs to “normalize” monetary policy, according to Reuters.
- On Monday, Japan's new “top foreign exchange diplomat,” Atsushi Mimura, said in an interview with NHK that the yen carry trades that had built up in the past were likely almost completely unwound. Mimura warned that market volatility could increase if such trades increased again. “We are constantly monitoring the market to prevent that from happening,” he added.
Technical reasons why: USD/JPY is consolidating near the 143.50 level, coinciding with the upper limit of the descending channel.
USD/JPY is trading around 143.40 on Wednesday. Analyzing the daily chart, the pair is moving inside a descending channel, indicating a bearish trend. Moreover, the 14-day Relative Strength Index (RSI) is just below the 50 level, confirming that bearish sentiment is at work.
On the downside, the USD/JPY pair is currently testing the 9-day EMA at the 143.03 level. A drop below this support could see the pair target the 139.58 region, which would be the lowest since June 2023.
The USD/JPY pair might test the immediate barrier near the 144.10 level, which is the upper limit of the descending channel. A break above this resistance could see the USD/JPY pair challenge the psychological barrier at 145.00.
USD/JPY: Daily Chart
Today's Japanese Yen Price
The table below shows the percentage change of the Japanese Yen (JPY) against the major listed currencies today. The Japanese Yen was the weakest against the Euro.
| USD | EUR | GBP | JPY | CAD | Australian Dollar | NZD | Swiss Franc | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.08% | 0.21% | 0.45% | 0.02% | 0.22% | 0.33% | 0.13% | |
| EUR | 0.08% | 0.29% | 0.53% | 0.10% | 0.30% | 0.43% | 0.21% | |
| GBP | -0.21% | -0.29% | 0.21% | -0.19% | -0.00% | 0.10% | -0.08% | |
| JPY | -0.45% | -0.53% | -0.21% | -0.42% | -0.22% | -0.10% | -0.30% | |
| CAD | -0.02% | -0.10% | 0.19% | 0.42% | 0.20% | 0.32% | 0.11% | |
| Australian Dollar | -0.22% | -0.30% | 0.00% | 0.22% | -0.20% | 0.14% | -0.08% | |
| NZD | -0.33% | -0.43% | -0.10% | 0.10% | -0.32% | -0.14% | -0.22% | |
| Swiss Franc | -0.13% | -0.21% | 0.08% | 0.30% | -0.11% | 0.08% | 0.22% |
The heat map displays the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Japanese Yen from the left column and move it along the horizontal line to US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Frequently asked questions about the Japanese Yen
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by factors such as the Bank of Japan's policies, the spread between Japanese and US bond yields, and traders' risk sentiment.
The Bank of Japan's movements are important for the yen, since one of its mandates is currency management. The bank sometimes intervenes directly in the currency market to weaken the yen, but often refrains from doing so due to political concerns with major trading partners. The current BOJ's ultra-loose monetary policy, based on a massive economic stimulus package, has caused the yen to weaken against major currencies. This process has worsened in recent times due to the widening divergence between the policy of the Bank of Japan and other major central banks, which have chosen to significantly raise interest rates to combat inflation at its highest level in decades.
The Bank of Japan's insistence on ultra-loose monetary policy has led to a growing divergence in policy with other central banks, particularly the U.S. Federal Reserve, which has helped to widen the gap between 10-year U.S. Treasury notes and Japanese government bonds, giving the U.S. dollar an edge over the Japanese yen.
The Japanese Yen is often seen as a safe investment, meaning that during times of market turmoil, investors are more likely to put their money into the Japanese Yen due to its reliability and stability. In times of volatility, the yen tends to rise in value against other currencies that are considered riskier investments.
