- The Japanese Yen recovers a bit from a multi-week low touched against the USD on Wednesday.
- Expectations that the BoJ will stick to its dovish stance in January should cap gains for the JPY.
- Reduced bets for a March Fed rate cut to act as a tailwind for the USD and the USD/JPY pair.
The Japanese Yen (JPY) ticks higher against its American counterpart during the Asian session on Thursday and for now, seems to have snapped a three-day losing streak to its lowest level since November 28 touched the previous day. A generally weaker risk tone is seen as a key factor benefiting the JPY’s relative safe-haven status on the back of a subdued US Dollar (USD) price action. That said, the upside remains capped amid bets that the Bank of Japan (BoJ) is unlikely to pivot away from its ultra-dovish stance in the wake of a devastating New Year’s Day earthquake in Japan, falling rates of inflation in Tokyo and weaker wage growth.
Furthermore, the stronger-than-expected US Retail Sales data released on Wednesday pointed to signs of a stronger consumer and suggested that the economy remains in good shape. This further forces investors to scale back their expectations for an early rate cut by the Federal Reserve (Fed), which remains supportive of elevated US Treasury bond yields and should act as a tailwind for the Greenback. Apart from this, the recent widening of the US-Japan rate differential should contribute to keeping a lid on any meaningful appreciating move for the JPY. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the upside.
Daily Digest Market Movers: Japanese Yen benefits from haven flows amid a softer USD, bearish bias remains
- The Japanese Yen continues to be undermined by the growing acceptance that the Bank of Japan is unlikely to pivot away from its ultra-dovish stance at the January 22-23 policy meeting.
- Wednesday’s upbeat US macro data further dashed expectations for an imminent shift in the Federal Reserve’s policy stance as soon as March and acts as a tailwind for the US Dollar.
- The Commerce Department reported that the headline US Retail Sales increased more than anticipated, by 0.6% in December, while sales excluding autos also topped market estimates.
- The data points to still-resilient consumer spending and the underlying strength that the US economy possessed, which gives the Fed more headroom to keep rates higher for longer.
- This comes after Fed Governor Christopher Waller said on Tuesday that the central bank should not rush to cut interest rates until it was clear lower inflation would be sustained.
- The yield on the benchmark 10-year US government bond climbed further beyond the 4% mark, hitting the highest level since December 13, and continued lending support to the buck.
- Geopolitical tensions and unimpressive economic growth figures from China temper investors’ appetite for riskier assets, benefitting the safe-haven JPY and capping the USD/JPY pair.
- In the latest development surrounding the Israel-Hamas war, Yemen’s Houthi rebels targeted a US-owned cargo ship with a kamikaze drone in the Red Sea late Wednesday.
- Data released on Wednesday showed that China’s economy expanded at an annual rate of 5.2% in the final quarter of 2023, slightly more than the official 5% growth target.
- However, a deepening property crisis, mounting deflationary risks and tepid demand cast doubts over the shakier recovery for the world’s second-largest economy.
Technical Analysis: USD/JPY to attract dip-buying near 100-day SMA/61.8% Fibo. confluence resistance breakpoint
From a technical perspective, the overnight sustained breakout and acceptance above the 147.50 confluence hurdle was seen as a fresh trigger for bullish traders. The said area comprises the 100-day Simple Moving Average (SMA) and the 61.8% Fibonacci retracement level of the November-December downfall, which, in turn, should act as a key pivotal point. Any subsequent slide is more likely to attract fresh buyers near the 147.00 round figure. This should help limit the downside for the USD/JPY pair near the 146.60-146.50 region.
On the flip side, the 148.50 area, or a multi-week peak set on Wednesday, now seems to act as an immediate barrier. Given that oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought zone, some follow-through buying has the potential to lift the USD/JPY pair to the 149.00 mark. The momentum could extend further towards the 149.70-149.75 region before spot prices aim to conquer the 150.00 psychological mark.
Japanese Yen price this week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.45% | 0.38% | 0.64% | 1.98% | 1.95% | 1.67% | 1.23% | |
| EUR | -0.46% | -0.07% | 0.18% | 1.53% | 1.50% | 1.23% | 0.78% | |
| GBP | -0.39% | 0.07% | 0.25% | 1.60% | 1.57% | 1.30% | 0.85% | |
| CAD | -0.64% | -0.20% | -0.27% | 1.35% | 1.32% | 1.04% | 0.60% | |
| AUD | -2.01% | -1.54% | -1.61% | -1.36% | -0.02% | -0.30% | -0.75% | |
| JPY | -1.99% | -1.54% | -1.73% | -1.33% | 0.02% | -0.28% | -0.74% | |
| NZD | -1.70% | -1.25% | -1.32% | -1.06% | 0.31% | 0.26% | -0.46% | |
| CHF | -1.24% | -0.79% | -0.85% | -0.60% | 0.77% | 0.73% | 0.45% |
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).
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank’s massive stimulus 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 policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
Source: https://www.fxstreet.com/news/japanese-yen-languishes-near-its-lowest-level-since-november-against-usd-202401180143