Stephen Innes
SPI Asset Management
The Japanese Ministry of Finance is believed to have intervened in the currency markets, yet the impact was only temporary. Despite initial selling pressure on the dollar hitting 155 , USDJPY quickly rebounded to levels seen just after the Bank of Japan's decision.
Nevertheless, the core drivers of the USDJPY pair remain largely unchanged. The currency pair is highly sensitive to movements in US 10-year yields, with the yield differentials still favoring the dollar by a country mile.
However, Japan is confronting a multifaceted challenge regarding its monetary policy and fiscal situation.
While there may not be a distinct threshold for stabilizing the yen and capping bond yields simultaneously, Japan's substantial debt burden complicates its policy options. A significant uptick in the yield of 10-year Japanese Government Bonds (JGBs) could potentially trigger a fiscal crisis, given the government's heavy reliance on borrowing to service its debt.
Balancing the management of the yen's exchange rate with maintaining stability in bond yields presents a delicate balancing act for Japanese policymakers. The country's elevated debt levels pose a significant hurdle, requiring careful navigation to steer clear of economic turbulence.
SPI Asset Management provides forex, commodities, and global indices analysis, in a timely and accurate fashion on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.
Our publications are for general information purposes only. It is not investment advice or a solicitation to buy or sell securities.
Opinions are the authors — not necessarily SPI Asset Management its officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.
Recommended Content
Editors’ Picks
AUD/USD steadies despite rising US inflation, traders eye Aussie WPI
The Australian Dollar registered gains against the US Dollar on Tuesday, even though inflation in the United States edged, spurring hawkish remarks by Fed Chair Jerome Powell. The AUD/USD trades near 0.6624, virtually unchanged as Wednesday’s Asian session commences.
USD/JPY extends its upside above 156.50 ahead of US CPI, Retail Sales data
The USD/JPY pair trades in positive territory for the fourth consecutive day near 156.55 on Wednesday during the early Asian session. The uptick of the pair is bolstered by the speculation that the Federal Reserve might maintain rates higher for longer amid the elevated inflation.
Gold price firmer amid mixed US PPI data, Fed’s uncertain on inflation
Gold prices climbed past the $2,359 figure on Tuesday after data released by the US Department of Labor revealed that factory gate inflation rose above estimates, signaling that prices remained elevated. Despite that, US Treasury yields are sliding, a headwind for the Greenback.
Ethereum bears attempt to take lead following increased odds for a spot ETH ETF denial
Ethereum is indicating signs of a bearish move on Tuesday as it is largely trading horizontally. Its co-founder Vitalik Buterin has also proposed a new type of gas fee structure, while the chances of the SEC approving a spot ETH ETF decrease with every passing day.
Is the US Dollar headed for a crash?
Ahead of the US CPI & Retail Sales report, I breakdown how to combine forex fundamentals with technicals to determine whether we've seen a US dollar top?