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Forex Today: US Dollar awaits key data, Japanese Yen holds near multi-decade lows

Here is what you need to know on Thursday, June 27:

The Japanese Yen (JPY) recovers slightly after falling to its weakest level since 1986 against the US Dollar (USD) on Wednesday. The European Commission will release consumer and business sentiment data in the European session. The US economic docket will feature the final revision to the first-quarter Gross Domestic Product growth, weekly Initial Jobless Claims, Durable Goods Orders and Pending Home Sales data for May. Later in the day, market focus will shift to the first US Presidential Debate between Joe Biden and Donald Trump.

US Dollar PRICE This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.

 USDEURGBPJPYCADAUDNZDCHF
USD 0.00%0.06%0.43%0.00%-0.37%0.42%0.35%
EUR0.00% 0.07%0.48%0.05%-0.34%0.47%0.43%
GBP-0.06%-0.07% 0.36%-0.03%-0.42%0.39%0.35%
JPY-0.43%-0.48%-0.36% -0.41%-0.75%0.05%-0.07%
CAD-0.00%-0.05%0.03%0.41% -0.36%0.42%0.38%
AUD0.37%0.34%0.42%0.75%0.36% 0.81%0.77%
NZD-0.42%-0.47%-0.39%-0.05%-0.42%-0.81% -0.05%
CHF-0.35%-0.43%-0.35%0.07%-0.38%-0.77%0.05% 

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

Following the subdued action seen earlier in the week, USD/JPY gathered bullish momentum and climbed to its highest level since 1986 above 160.80 on Wednesday. Verbal intervention from Japanese government officials helped the JPY stage a rebound early Thursday, allowing USD/JPY to retreat back below 160.50. Japan’s Chief Cabinet Secretary Hayashi and Finance Minister Shunichi Suzuki both refrained from commenting on foreign exchange levels but said that they are watching the action in currency markets with a sense of urgency and reiterated that they are prepared to take necessary actions. Meanwhile, the data from Japan showed earlier in the day that Retail Trade grew 3% on a yearly basis in May, surpassing the market expectation and April's growth of 2%.

The USD Index climbed to its highest level since early May above 106.00 on Wednesday. The index stays in a consolidation phase and fluctuates slightly below this level in the European morning on Thursday. In the meantime, US stock index futures trade in negative territory, while the benchmark 10-year US Treasury bond yield holds steady above 4.3% after rising nearly 2% on Wednesday.

EUR/USD registered losses for the second straight day on Wednesday. Early Thursday, the pair rebounds modestly but remains slightly below 1.0700.

GBP/USD extended its slide amid renewed USD strength and lost 0.5% on Wednesday. The pair edges higher toward 1.2650 to start the European session on Thursday.

Pressured by rising US Treasury bond yields, Gold dropped to its lowest level in over two weeks below $2,300 on Wednesday. XAU/USD stages a correction and trades at around $2,300 in the European morning.

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.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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