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Japanese Yen rallies to February 18 high as upbeat wage data and GDP lift BoJ hike bets

  • USD/JPY attracts heavy selling for the second straight day amid a combination of negative factors.
  • Japan’s upbeat data bolsters BoJ rate hike bets and boosts the JPY amid a suspected intervention.
  • The USD remains weak despite hawkish Fed bets and geopolitical risks, further exerting pressure.

The USD/JPY pair declines for the second straight day – also marking the fourth day of a fall in the previous five – and sinks to its lowest level since February 18, around mid-153.00s during the Asian session on Tuesday. Japan's upbeat data reaffirms hawkish Bank of Japan (BoJ) bets and lifts the Japanese Yen (JPY), exerting heavy pressure on the currency pair amid a broadly weaker US Dollar (USD).

A government report showed earlier today that Japan's real wages climbed 2.4% in July from a year earlier, marking the biggest increase since May 2021 ​and the seventh consecutive month of rise. The inflation rate used by the labour ministry to calculate the real wages moved above 2% for the first time this year. Adding to this, revised data released by the Cabinet Office revealed that Japan’s economy expanded at an annualized rate of 1.4% during the April–June period, revised up from the preliminary estimate of 1.1%. This supports the case for the BoJ to raise interest rates next week and continue tightening thereafter.

Traders now seem to have fully priced in a 25 basis point (bps) rate hike at the September 17–18 BoJ meeting. Moreover, some analysts see the risk of a jumbo hike to anchor rising inflation expectations, cap long-end yields and ultimately support the JPY. Moreover, renewed speculation of another currency market intervention by Japanese authorities turns out to be another factor underpinning the JPY. The USD, on the other hand, attracts some follow-through selling, despite hawkish US Federal Reserve (Fed) expectations, and contributes to the heavily offered tone surrounding the USD/JPY pair and favors bears.

Against the backdrop of inflation risks stemming from elevated energy prices, the better-than-expected US Nonfarm Payrolls (NFP) report increased the chances of a Fed rate hike at the September 15-16 meeting. USD bulls, however, opt to wait for the release of the latest US inflation figures – the Producer Price Index (PPI) and the Consumer Price Index (PPI) on Thursday and Friday, respectively. This outweighs support from rising geopolitical tensions and validates the negative outlook for the USD/JPY pair, though oversold conditions warrant some caution before positioning for any further depreciating move.

USD/JPY daily chart

Chart Analysis USD/JPY

Technical Analysis

The USD/JPY pair has slipped below the 155.30-155.20 horizontal support, keeping the near-term bias bearish and backing the case for an extension of the recent pullback from multi-decade highs. As sentiment shifts away from Yen weakness, any attempted recovery could be seen as a selling opportunity and remain capped near the said support breakpoint.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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 strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.12%-0.19%-1.46%-0.20%-0.27%0.06%-0.01%
EUR0.12%-0.07%-1.32%-0.07%-0.12%0.19%0.12%
GBP0.19%0.07%-1.37%-0.01%-0.07%0.25%0.19%
JPY1.46%1.32%1.37%1.37%1.28%1.60%1.53%
CAD0.20%0.07%0.01%-1.37%-0.02%0.26%0.20%
AUD0.27%0.12%0.07%-1.28%0.02%0.33%0.26%
NZD-0.06%-0.19%-0.25%-1.60%-0.26%-0.33%-0.07%
CHF0.00%-0.12%-0.19%-1.53%-0.20%-0.26%0.07%

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).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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