Forex Today: Japanese Yen slides as BoJ maintains policy settings

Here is what you need to know on Friday, June 14:

The Japanese Yen (JPY)stays under selling pressure on Friday as markets assess the Bank of Japan's (BoJ) monetary policy announcements. The US economic calendar will feature Export Price Index and Import Price Index data for May. Later in the session, the University of Michigan will release the preliminary Consumer Sentiment Index for June.

The BoJ held its policy rate unchanged at 0% for the second straight meeting in June, as widely anticipated. The BoJ did not make any changes to its massive JPY6 trillion ($38.14 billion) monthly Japanese government bonds (JGB) buying programme either. The bank, however, announced that they will hold a meeting with bond market participants and decide on a specific bond buying reduction plan for the next 1-2 years at the next policy meeting in July. In the post-meeting press conference, Governor Kazuo Ueda explained that it is important to reduce JGB purchases in a foreseeable manner, while ensuring flexibility to be mindful of stability in the bond market.

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 US Dollar.

USD   0.18% 0.28% 0.68% 0.05% 0.29% 0.51% 0.06%
EUR -0.18%   0.10% 0.58% -0.15% 0.09% 0.31% -0.12%
GBP -0.28% -0.10%   0.46% -0.23% 0.02% 0.21% -0.21%
JPY -0.68% -0.58% -0.46%   -0.65% -0.41% -0.22% -0.62%
CAD -0.05% 0.15% 0.23% 0.65%   0.25% 0.44% 0.00%
AUD -0.29% -0.09% -0.02% 0.41% -0.25%   0.21% -0.24%
NZD -0.51% -0.31% -0.21% 0.22% -0.44% -0.21%   -0.42%
CHF -0.06% 0.12% 0.21% 0.62% -0.01% 0.24% 0.42%  

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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

USD/JPY gathered bullish momentum following the BoJ event and was last seen rising 0.6% on the day at around 158.00. Reflecting the broad-based selling pressure surrounding the JPY, EUR/JPY was up 0.4% at 169.30.

Meanwhile, the US Dollar (USD) continues to gather strength against its rivals following the sharp decline seen after soft inflation data on Wednesday. The risk-averse market atmosphere, the sharp decline seen in the JPY and the lack of demand for European currencies amid political jitters, seem to be helping the USD capture capital outflows. At the time of press, the USD Index was trading at its highest level since early March, rising 0.25% on the day near 105.50.

EUR/USD stays under heavy bearish pressure in the European session and declines toward 1.0700.

After snapping a three-day winning streak on Thursday, GBP/USD continues to push lower early Friday and was last seen trading below 1.2750.

Despite the broad-based USD strength, XAU/USD clings to small daily gains at around $2,310. Gold seems to be benefiting from risk aversion ahead of the weekend.

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.


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