- The Japanese yen continues to receive support due to expectations that the Bank of Japan will change its hawkish stance.
- Bets on Fed June interest rate cut hurt USD and put further pressure on USD/JPY.
- An upwardly revised version of Japan’s fourth-quarter GDP report contributed to the mood of expectations on Monday.
The Japanese yen (JPY) rose against the United States to its highest level since early February on Friday, amid widespread speculation that a change in the Bank of Japan’s policy stance is imminent. Furthermore, investors are confident that another large wage hike in Japan will increase demand-driven inflationary pressures and allow the Bank of Japan to lift negative interest rates as early as its March 18-19 meeting. It seems there is. This, along with the upward revision of Japan’s Q4 GDP, will support the yen and keep the USD/JPY pair depressed throughout Monday’s Asian session.
Meanwhile, the US dollar (USD) is expected to strengthen its rebound late Friday from its lowest since mid-January touched by the US jobs report, which could help limit further losses for the currency pair. That said, USD bulls are refraining from betting aggressively as there is a growing perception that the Federal Reserve is on track to start cutting interest rates in the coming months. Separately, a general softening in risk tone could benefit JPY’s relative safe-haven status and help prevent a meaningful recovery in the USD/JPY pair.
Market focus now shifts to US consumer inflation data due to be released on Tuesday. The important US CPI report should play a key role in influencing investors’ expectations about the Fed’s rate cut path and, in turn, driving near-term US dollar demand. Nevertheless, the aforementioned fundamentals suggest that the path of least resistance is to the downside for the USD/JPY pair, and bullish traders should exercise caution.
Daily Digest Market Movers: Japanese Yen’s Retention Supported by Growing Expectations of Bank of Japan Interest Rate Hike
- The Japanese yen held an advantage over the US yen for the sixth consecutive day on Monday, amid growing expectations that the Bank of Japan will end its negative interest rate policy in March.
- Jiji Press reported over the weekend that the Bank of Japan is considering abolishing its yield curve control program and indicating in advance the amount it plans to purchase government bonds.
- Additionally, data released last week showed Japan’s wage growth hit its highest rate since June last year, reaffirming market views of an imminent change in the Bank of Japan’s monetary policy stance.
- Monday’s revised GDP report showed Japan’s economy expanded 0.1% in the fourth quarter, versus a previously reported 0.1% contraction, avoiding a technical recession.
- This has given the Bank of Japan some breathing room to shift away from its ultra-accommodative monetary policy settings, which continues to support the yen, pushing the USD/JPY pair near one-month lows.
- The U.S. dollar fell to its lowest level since mid-January on Friday as the U.S. unemployment rate rose to a two-year high, raising hopes for a June interest rate cut by the Federal Reserve.
- The headline NFP showed the U.S. economy added 275,000 jobs in February compared to an estimated 200,000, down from the previous month’s reading of 353,000 to 229,000. It was offset by a fix.
- The chance that the Fed will cut interest rates in May has increased to about 30% following the important jobs report, but the most likely time for such action remains the June policy meeting.
- Yields on the 10-year U.S. Treasury note are hovering near their lowest levels in more than a month, which is expected to limit any significant recovery in the dollar and create a headwind for the currency pair.
- Investors are now looking forward to the latest U.S. consumer inflation data on Tuesday for fresh stimulus, but the short-term bias appears to be firmly in favor of the yen bulls.
Technical Analysis: USD/JPY bears are currently waiting for a break below the 200-day SMA before making new bets
From a technical perspective, Friday’s breakout of the 100-day simple moving average (SMA) was seen as another opening for bearish traders. This comes in addition to the recent repeated failure prior to the 152.00 mark, which constitutes the formation of a double top pattern on the daily chart. Additionally, the oscillator in the chart above remains deep in negative territory, confirming the bearish outlook for the USD/JPY pair. That being said, it would still be wise to wait for acceptance below the 38.2% Fibonacci retracement level of the December-February rally before bracing for further losses. Some of the follow-through selling below the 200-day SMA, which is currently anchored around the 146.30-146.25 area, could reaffirm the negative bias and drag the spot price below the 146.00 round figure, towards the 50% fibo. It will be. level, near the 145.60 zone.
On the flip side, any meaningful recovery attempt above the 147.00 round figure is likely to attract fresh sellers, and the upper bound is likely to remain near the 100-day SMA support breakpoint, currently at mid-147.00. There is resistance nearby. However, if the strength persists beyond that, it could trigger a short covering rally and push the USD/JPY pair above the 148.00 mark and test the next related hurdle around 148.65-148.70. This momentum could further expand towards reclaiming the 149.00 round figure on its way to 149.25, which has turned from horizontal support to resistance.
Today’s Japanese yen price
The table below shows the percentage change of the Japanese Yen (JPY) against major listed currencies today. The Japanese yen was the strongest against the British pound.
| USD | EUR | GBP | CAD | australian dollar | JPY | new zealand dollar | Swiss franc | |
| USD | 0.01% | 0.01% | -0.03% | 0.15% | 0.14% | 0.09% | -0.01% | |
| EUR | -0.01% | -0.02% | -0.05% | 0.14% | 0.12% | 0.06% | -0.02% | |
| GBP | 0.00% | 0.01% | -0.03% | 0.14% | 0.15% | 0.10% | 0.00% | |
| CAD | 0.04% | 0.04% | 0.04% | 0.18% | 0.15% | 0.10% | 0.02% | |
| australian dollar | -0.15% | -0.14% | -0.14% | -0.19% | -0.01% | -0.06% | -0.16% | |
| JPY | -0.12% | -0.14% | 0.11% | -0.19% | 0.03% | -0.04% | -0.14% | |
| new zealand dollar | -0.09% | -0.06% | -0.09% | -0.13% | 0.06% | 0.05% | -0.11% | |
| Swiss franc | 0.03% | 0.04% | 0.02% | -0.01% | 0.18% | 0.13% | 0.09% |
The heat map shows 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 Euro from the left column and move along the horizontal line to Japanese Yen, the percentage change displayed in the box represents EUR (base)/JPY (estimate).
Bank of Japan Frequently Asked Questions
The Bank of Japan (BoJ) is Japan’s central bank, which determines the country’s monetary policy. Its mission is to issue paper money and exercise monetary and monetary control to ensure price stability, which means an inflation target of about 2%.
The Bank of Japan began a super-easy monetary policy in 2013 to stimulate the economy and promote inflation in a low-inflation environment. The bank’s policy is based on quantitative and qualitative easing (QQE), or printing money that provides liquidity by buying assets such as government bonds and corporate bonds. In 2016, the bank doubled down on its strategy, first introducing negative interest rates and then further easing policy by directly controlling the yield on 10-year Treasuries.
The World Bank’s large-scale economic stimulus package has caused the yen to depreciate compared to major currencies. This process has recently been exacerbated by increased policy divergence between the Bank of Japan and other major central banks, which have taken significant steps to combat the highest levels of inflation in decades. They are choosing to raise interest rates. The Bank of Japan’s interest rate restraint policy has widened the gap with other currencies, pushing down the value of the yen.
Japan’s inflation rate has risen due to the weak yen and soaring global energy prices, exceeding the Bank of Japan’s 2% target. However, the Bank of Japan has judged that there is still no prospect of achieving the 2% target in a sustainable and stable manner, and it is unlikely that the current policy will be changed suddenly.
