Japanese Yen flat-lines against USD, remains on track to snap two-week winning streak

  • The Japanese Yen recovers modest intraday losses against the USD, albeit lacks follow-through. 
  • The BoJ policy uncertainty turns out to be a key factor capping any meaningful gains for the JPY. 
  • The hotter US PPI released on Thursday underpins the USD and also lends support to USD/JPY.
  • Traders look to the US data for some impetus ahead of the key central bank meetings next week.

The Japanese Yen (JPY) stages a modest recovery from over a one-week low touched against its American counterpart on Friday and trades near the daily peak heading into the European session. Japan’s biggest companies responded to the Union’s wage hike demand in full, which reaffirmed market expectations for an imminent shift in the Bank of Japan’s (BoJ) policy stance. This, along with a generally softer risk tone, turns out to be a key factor lending some support to the safe-haven JPY. 

Meanwhile, BoJ Governor Kazuo Ueda earlier this week offered a slightly bleaker assessment of the economy and dashed hopes for a rate hike at the March 18-19 meeting. Apart from this, a modest US Dollar (USD) uptick, bolstered by expectations that the Federal Reserve (Fed) will stick to its higher-for-longer interest rates narrative to bring down inflation, helps limit the downside for the USD/JPY pair. Traders also seem reluctant ahead of next week’s key central bank event risks. 

The BoJ is scheduled to announce its policy decision on Tuesday, which will be followed by the outcome of the two-day FOMC meeting on Wednesday. This, in turn, will play a key role in determining the near-term trajectory for the USD/JPY pair. In the meantime, traders on Friday will take cues from the US economic docket – featuring the Empire State Manufacturing Index, Industrial Production figures and the Prelim Michigan Consumer Sentiment Index – for short-term opportunities. Nevertheless, spot prices remain on track to register strong weekly gains and snap a two-week of losing streak. 

Daily Digest Market Movers: Japanese Yen struggles to lure buyers amid the BoJ policy uncertainty

  • The uncertainty over the Bank of Japan’s next policy move continues to undermine the Japanese Yen and lifts the USD/JPY pair higher for the fourth successive day, to over a one-week high during the Asian session. 
  • BoJ Governor Kazuo Ueda offered few clues on how soon the central bank would end the negative rate and said that policymakers will debate whether the outlook is bright enough to phase out the massive monetary stimulus.
  • Jiji news agency reported on Thursday that BoJ has started to make arrangements to end its negative interest rate policy at the March meeting as the bumper wage hikes give the central bank leeway to make the key policy shift.
  • Japan’s Finance Minister Shunichi Suzuki said on Friday that the economy is no longer in deflation and that the government will mobilize all policy steps available to continue the strong trend of wage hikes this year.
  • Market participants, however, seem convinced that the BoJ won’t tighten policy next week and wait until April when the amount of the wage rise pass-through to small and medium-sized firms becomes evident.
  • Meanwhile, the hotter-than-expected US Producer Price Index released on Thursday forced investors to scale back their bets for an interest rate cut in June, pushing the US Treasury bond yields and the US Dollar higher.
  • Data published by the US Bureau of Labor Statistics showed that the PPI for final demand rose by a 1.6% YoY rate in February as compared to the previous month’s upwardly revised print of 1% and the 1.1% estimated. 
  • Separately, the US Department of Labor (DOL) reported that there were 209K initial jobless claims in the week ending March 9, down from the previous week’s 210K and better than the market expectation of 218 K.
  • This helps offset a slight disappointment from the US Retail Sales figures, which rose by 0.6% in February. Meanwhile, Sales Ex-Autos were up 0.3% and Retail Sales Control Group came in flat during the reported month.
  • Traders now look to Friday’s US economic docket – featuring the release of the Empire State Manufacturing Index, Industrial Production figures and the Preliminary University of Michigan Consumer Sentiment Index.
  • The focus, however, remains glued to the BoJ and the FOMC monetary policy meetings next week, which should provide a fresh impetus and play a key role in determining the near-term trend for the USD/JPY pair. 

Technical Analysis: USD/JPY bulls have the upper hand above 148.00 mark/ the 100-day SMA

From a technical perspective, the overnight breakout through the 100-day Simple Moving Average (SMA) and a subsequent move beyond the 148.00 mark was seen as a key trigger for bullish traders. That said, oscillators on the daily chart – though have been recovering from lower levels – are yet to confirm a positive bias. Hence, any subsequent move up is more likely to confront stiff resistance near the 149.00 strong horizontal support breakpoint, now turned resistance. Some follow-through buying, however, might prompt an aggressive short-covering move and allow the USD/JPY pair to aim back to reclaim the 150.00 psychological mark.

On the flip side, the 148.00 round figure, followed by the 100-day SMA, currently around the 147.70-147.65 region, could offer immediate support. A convincing break below might turn the USD/JPY pair vulnerable to accelerate the fall back towards the 147.00 mark en route to the monthly swing low, around the 146.50-146.45 region. The latter nears the very important 200-day SMA, which if broken decisively will set the stage for the resumption of the recent sharp pullback from the vicinity of the 152.00 mark, or the YTD peak touched in February.

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 Canadian Dollar.

USD   0.05% 0.03% -0.01% 0.19% 0.01% 0.37% 0.05%
EUR -0.04%   -0.01% -0.07% 0.10% -0.06% 0.32% 0.00%
GBP -0.06% 0.01%   -0.07% 0.11% -0.04% 0.32% 0.01%
CAD 0.03% 0.06% 0.06%   0.21% 0.02% 0.38% 0.07%
AUD -0.19% -0.10% -0.11% -0.16%   -0.15% 0.19% -0.10%
JPY 0.00% 0.07% 0.04% -0.02% 0.18%   0.35% 0.05%
NZD -0.37% -0.31% -0.33% -0.38% -0.18% -0.36%   -0.31%
CHF -0.05% 0.00% -0.02% -0.07% 0.13% -0.05% 0.31%  

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.

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