Forex Today: Japanese Yen trades at multi-decade lows, markets look for next catalyst

Here is what you need to know on Wednesday, March 27:

The Japanese Yen (JPY) continued to weaken against the US Dollar (USD), with USD/JPY reaching its highest level since 1990 near 152.00 early Wednesday. Investors will keep a close eye in the pair's action amid growing risk of a central bank intervention. The European Commission will release consumer and business sentiment data for March. The US economic docket will not feature any high-tier data releases. Federal Reserve (Fed) Governor Christopher Waller is scheduled to speak later in the American session. 

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 weakest against the Euro.

USD   -0.21% -0.17% -0.13% -0.22% 0.23% -0.22% 0.69%
EUR 0.24%   0.04% 0.11% 0.03% 0.45% 0.05% 0.93%
GBP 0.17% -0.04%   0.04% -0.03% 0.40% 0.00% 0.86%
CAD 0.12% -0.10% -0.05%   -0.08% 0.30% -0.06% 0.81%
AUD 0.23% 0.01% 0.06% 0.10%   0.44% 0.01% 0.92%
JPY -0.23% -0.44% -0.29% -0.33% -0.43%   -0.43% 0.54%
NZD 0.16% 0.00% 0.06% 0.09% 0.01% 0.43%   0.91%
CHF -0.67% -0.92% -0.88% -0.84% -0.88% -0.48% -0.88%  

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).


Several Bank of Japan (BoJ) and Japanese government officials crossed the wires during the Asian trading hours on Wednesday, looking to limit the JPY weakness with verbal interventions. Japanese Finance Minister Shunichi Suzuki repeated that they won't rule out any steps, including decisive ones, to respond to disorderly moves in the foreign exchange market. After coming within a few pips of 152.00, USD/JPY edged slightly lower but stabilized above 151.50. Bank of Japan (BoJ) board member Naoki Tamura said that they may hike rates again if upside risks to trend inflation, price outlook heighten, or the likelihood of stably hitting price goal rises further.

The USD Index staged a rebound in the American session on Tuesday and registered marginal daily gains. The index holds steady above 104.00 early Wednesday. The benchmark 10-year US Treasury bond yield continues to fluctuate in a tight channel above 4.2% and US stock index futures trade in positive territory in the European morning.

EUR/USD lost its traction and retreated below 1.0850 in the American session on Tuesday to end the day virtually unchanged. The pair moves up and down in a narrow band above 1.0800 in the early European session.

GBP/USD failed to preserve its recovery momentum and Tuesday and closed in the red. The pair stays on the back foot early Wednesday and edges lower toward 1.2600. The Bank of England will release the Financial Policy Committee statement later in the session.

Gold reversed its direction after testing $2,200 on Tuesday and retreated below $2,180. XAU/USD stays in a consolidation phase early Wednesday.

Gold price remains confined in narrow band below $2,200 mark, bullish bias seems intact.

(This story was corrected on March 27 at 07:30 GMT to say that the USD Index holds steady above 104.00, not 140.00.)


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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