Japanese Yen hangs near weekly low against USD, looks to US GDP/Fedspeak for fresh impetus

  • The Japanese Yen comes under some renewed selling pressure amid the BoJ policy uncertainty. 
  • Hawkish Fed expectations revive the USD demand and also lend support to the USD/JPY pair.
  • Traders now look forward to the Prelim US Q4 GDP ahead of the PCE Price Index on Thursday.

The Japanese Yen (JPY) struggles to capitalize on the previous day's slightly hotter-than-expected domestic consumer inflation-inspired uptick and meets with a fresh supply on Wednesday amid the Bank of Japan's (BoJ) policy uncertainty. Japan’s core CPI exceeded forecasts and revived bets that the BoJ might end negative interest rates soon. Meanwhile, the Japanese economy unexpectedly fell into recession during the fourth quarter and might force the central bank to delay its plans to tighten the monetary policy. This, along with an extension of the recent risk-on rally across the global equity markets, turns out to be key factors undermining the safe-haven JPY. 

The US Dollar (USD), on the other hand, draws support from growing acceptance that the Federal Reserve (Fed) will wait until the June policy meeting before cutting interest rates. This, in turn, assists the USD/JPY pair to build on the overnight bounce from the 150.00 psychological mark and stick to its modest intraday gains heading into the European session on Wednesday. That said, a fresh leg down in the US Treasury bond yields might hold back the USD bulls from placing aggressive bets and keep a lid on any further appreciating move. Moreover, traders might prefer to wait for the release of the US Personal Consumption Expenditures (PCE) Price Index on Thursday.

The crucial US inflation data might provide fresh cues about the Fed's rate cut path, which will play a key role in driving the USD demand and help determine the near-term trajectory for the USD/JPY pair. In the meantime, traders on Tuesday will take cues from the Prelim US Q4 GDP print and speeches by influential FOMC members to grab short-term opportunities later during the North American session. Nevertheless, the divergent BoJ-Fed monetary policy expectations suggest that the path of least resistance for the currency pair remains to the upside. 

Daily digest market movers: Japanese Yen loses traction against USD amid divergent BoJ-Fed policy expectations

  • The Japanese Yen struggles to capitalize on Tuesday's slightly warmer domestic consumer inflation-inspired gains amid the uncertainty over the Bank of Japan's policy outlook.
  • The latest CPI prints suggested that inflation is sticky even in Japan, fuelling speculations that the BoJ will eventually pivot away from its ultra-accommodative monetary policy settings.
  • Japan's economy unexpectedly slipped into recession during the fourth quarter and might force the central bank to delay its plan to end negative interest rates in the coming months.
  • US President Joe Biden emphasized the necessity of finding a solution to prevent a detrimental government shutdown on March 1 as a legislative logjam showed no signs of abating.
  • The US Census Bureau reported on Tuesday that Durable Goods Orders declined by 6.1% in January, the most in nearly four years and worse than a contraction of 4.5% anticipated.
  • The Conference Board's Consumer Sentiment Index fell to 106.7 in February despite a decline in inflation expectations for the next 12 months to the lowest level in almost four years.
  • The Federal Reserve Bank of Richmond's manufacturing index registered the fourth straight month of a negative reading, though improved to -5 in February from the -15 previous.
  • Apart from this, a modest downtick in the US Treasury bond yields keeps the US Dollar bulls on the defensive and is seen acting as a headwind for the USD/JPY pair on Wednesday.
  • Traders now look to the release of the Prelim US Q4 GDP print, which, along with speeches by influential FOMC members, will drive the USD demand and provide a fresh impetus.
  • The focus, however, will remain glued to the US Personal Consumption Expenditures (PCE) Price Index on Thursday, which could offer fresh cues about the Fed's rate-cut path.

Technical analysis: USD/JPY remains below multi-month peak near 150.90, bullish pontential seems intact

From a technical perspective, the overnight swing low, around the 150.00 mark, might continue to act as immediate support ahead of the 149.70-149.65 region. A convincing break below the latter could drag the USD/JPY pair to the 149.35-149.30 area en route to the 149.00 mark and the 148.80-148.70 strong horizontal resistance breakpoint. Some follow-through selling will negate any near-term positive bias and pave the way for a further depreciating move.

On the flip side, bulls need to wait for a sustained strength beyond the multi-month top, around the 150.85-150.90 zone, before placing fresh bets. Given that oscillators on the daily chart are holding comfortably in the positive territory, the USD/JPY pair might then climb to the 151.45 intermediate hurdle before eventually climbing towards the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and tested in November 2023.

Japanese Yen price today

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

USD   0.05% 0.07% 0.05% 0.19% -0.07% 0.95% 0.05%
EUR -0.04%   0.03% 0.00% 0.17% -0.11% 0.91% 0.01%
GBP -0.06% -0.02%   -0.01% 0.15% -0.13% 0.89% -0.01%
CAD -0.04% 0.00% 0.03%   0.17% -0.11% 0.87% 0.04%
AUD -0.21% -0.15% -0.13% -0.16%   -0.27% 0.72% -0.15%
JPY 0.06% 0.10% 0.13% 0.11% 0.28%   1.01% 0.12%
NZD -0.92% -0.88% -0.85% -0.88% -0.71% -0.99%   -0.87%
CHF -0.05% 0.01% 0.02% 0.00% 0.13% -0.11% 0.90%  

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).

Japanese Yen FAQs

What key factors drive the Japanese Yen?

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.

How do the decisions of the Bank of Japan impact the Japanese Yen?

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.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

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.

How does broader risk sentiment impact 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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