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Japanese Yen recovers from two-week low on fast BoJ rate hike bets, softer USD

  • USD/JPY pulls back from a two-week high, touched on Thursday, though it lacks follow-through.
  • Reports of more aggressive BoJ rate hikes lift the JPY and weigh on the pair amid a weaker USD.
  • Geopolitical uncertainties help limit USD losses, while the US-Japan rate gap might cap the JPY.

The USD/JPY pair sticks to modest intraday losses through the first half of the European session on Friday, though it manages to hold above the 159.00 mark and remains close to a two-week top set the previous day. Nevertheless, spot prices remain on track to register strong gains for the second week in a row.

The Japanese Yen (JPY) gets a minor lift amid reports that the Bank of Japan (BoJ) is set to raise interest rates as soon as September and is likely to hike more aggressively thereafter than the current pace of roughly twice a year. The US Dollar (USD), on the other hand, is weighed down by signs of cooling US inflation, which gives the Federal Reserve (Fed) room to hold interest rates steady. This, in turn, prompts some selling around the USD/JPY pair.

The downside for the USD, however, seems cushioned as traders are still pricing in a greater chance that the US central bank will raise borrowing costs by the year-end. Moreover, geopolitical uncertainties stemming from the US-Iran standoff could act as a tailwind for the safe-haven USD, while economic risks due to energy supply disruptions might cap the JPY amid fiscal concerns. This could support the USD/JPY pair and warrants caution for bearish traders.

Furthermore, borrowing costs in Japan remain significantly lower compared to other major economies, including the US. This might continue to fuel the so-called carry trade, which should contribute to capping the JPY. Hence, it will be prudent to wait for strong follow-through selling before confirming that the USD/JPY pair's recent sharp recovery from the lowest level since May has run out of steam. Traders now look to the US macro data for a fresh impetus.

USD/JPY 4-hour chart

Chart Analysis USD/JPY

Technical Analysis

The USD/JPY pair faces rejection near the 50.0% Fibonacci retracement of the intervention-led downfall from a four-decade high. The said hurdle at 159.61 might continue to cap the upside, which if cleared should pave the way for a move to a denser barrier in the 160.32–160.65 zone where the 100-period SMA and the 61.8% Fibo. level converge. On the downside, initial support comes from the 38.2% retracement at 158.58, ahead of the 23.6% level at 157.30, with a deeper structural floor near the 155.22 anchor low if selling pressure accelerates.

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

Japanese Yen Price Today

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

USDEURGBPJPYCADAUDNZDCHF
USD-0.18%-0.18%-0.18%-0.29%-0.18%-0.41%-0.07%
EUR0.18%-0.00%-0.02%-0.15%0.00%-0.24%0.11%
GBP0.18%0.00%0.00%-0.14%0.00%-0.22%0.12%
JPY0.18%0.02%0.00%-0.11%-0.01%-0.26%0.12%
CAD0.29%0.15%0.14%0.11%0.11%-0.12%0.23%
AUD0.18%-0.01%-0.01%0.00%-0.11%-0.23%0.12%
NZD0.41%0.24%0.22%0.26%0.12%0.23%0.37%
CHF0.07%-0.11%-0.12%-0.12%-0.23%-0.12%-0.37%

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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