Japanese Yen: BoJ rate check limits yen downside – MUFG

FXStreet Insights Team FXStreet

MUFG’s Lee Hardman notes that the Japanese Yen initially weakened sharply after the latest BoJ policy update, with USD/JPY briefly above 158.00 before retreating towards 157.00. Reports of a BoJ rate check signalled readiness to intervene, capping near-term Yen weakness as USD/JPY approaches 160.00. MUFG sees a “new phase” of policy consistent with rate hikes roughly every three months, with external factors like higher US yields and energy prices still pressuring the Yen.

BoJ signals limited yen weakness tolerance

"The yen initially weakened sharply after the BoJ’s latest policy update on Friday resulting in USD/JPY hitting a high of 158.05 but has since dropped back towards the 157.00."

"The trigger for the yen rebound late on Friday were reports that the BoJ had conducted a rate check during the New York trading session sending a clear signal that they are prepared to intervene again if the yen continues to weaken."

"The rate check should help to dampen market expectations for how much the yen will be allowed to weaken in the near-term as USD/JPY moves closer to the 160.00-level."

"We believe that the “new phase” for monetary policy is consistent with a rate hike every three months."

"The combination of higher energy prices and widening yield spreads is making it more difficult for Japanese policymakers to prevent a weaker yen, and increasing pressure to intervene again to buy more time."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD consolidates near 0.7000 as USD stays weak

AUD/USD holds steady above 0.7000 during Thursday’s Asian session, consolidating the previous day’s recovery gains from a near three-week low as the Democratic sweep in the US midterm elections and Iran diplomacy hopes continue to weigh on the US Dollar. Bulls, however, seem hesitant as focus shifts to Friday’s crucial US NFP report.

USD/JPY drifts lower to 158.25 on hawkish BoJ Minutes, weak USD

USD/JPY trades with a negative bias for the second straight day on Thursday as hawkish BoJ Minutes, showing members agreed to keep raising rates, and intervention risks support the Japanese Yen. Meanwhile, US midterm election results and hopes for Iran diplomacy keep the US Dollar depressed as focus shifts to Friday’s US NFP report.

Gold gives away gains; focus is back to $4,000

Gold now surrenders part of its initial bull run and breaks below the key $4,100 mark per troy ounce on Thursday. The yellow metal extends it recovery on the back of the mild advance in the Greenback and declining US Treasury yields following the US midterms elections.

The memory trade collapses as Sandisk sheds 17%, Micron sinks to May levels

If Wednesday's stock market rally was a broad vote of confidence in the Democratic sweep of the US midterm elections, Thursday is the other side of that coin. While the AI sell-off already began on Wednesday, it has kicked into higher gear on Thursday. The NASDAQ Composite has swung to a 4% loss in the morning regular session, while the S&P 500 and Dow Jones also shed Wednesday's gains.

NFP stress test: Six payrolls releases, measured in daily-loss limits

Friday's US employment report is usually previewed in terms of the headline number and the reaction in the Dollar. For a growing group of traders, those running funded or evaluation accounts with a fixed daily loss limit, there is a more practical question: how much of that limit can the first hour consume, regardless of direction?

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.