- USD/JPY rises to another multi-decade high amidst enthusiasm for the US Dollar.
- US economic exceptionalism and a massive US Treasury bond sale are fueling USD buying.
- Japanese Finmin verbal intervention warning is ignored by USD/JPY.
USD/JPY pulls back a touch after making a new high for April – and the last 34 years – at 154.86 on Tuesday, as the US Dollar (USD) returns to favor amid continued optimism regarding the US economy.
USD/JPY bulls deaf to Suzuki warning
USD/JPY rallies despite Japanese Finance Minister Shunichi Suzuki warning the authorities might directly intervene to prop up the Japanese Yen (JPY) on Tuesday. Suzuki said that “the environment” is ripe for currency intervention. In addition, USD/JPY is now well above the historic intervention zone, seen as 150.00-152.00.
Last week US Treasury Secretary Janet Yellen met with the Finance Ministers of Japan and South Korea and tacitly agreed to allow them to prop up their currencies if necessary, according to Bloomberg News.
The slight uptick in Japanese preliminary Purchasing Manager Index (PMI) data for April, released on Tuesday, only temporarily slowed USD/JPY’s relentless climb.
Traders now look to US S&P Global PMIs out at 13.45 GMT, for more information regarding the progress of the US economy. A higher-than-expected result will reinforce the US’s reputation for economic exceptionalism and continue USD/JPY’s uptrend.
Massive US Treasury bond sale may underpin USD/JPY
The US government is auctioning $180 billion worth of Treasury Notes this week as the US government issues more debt. $180B is a very large amount in such a short space of time – equivalent to a quarterly allocation normally – according to Mark Cranfield of Bloomberg MLIV.
In addition, the largest ever auction of 2-year US Treasury Notes is taking place on Tuesday. The auctions are likely to lead to higher US Treasury yields and given increased demand from foreign bond buyers, USD buying which could have a bullish impact on USD/JPY, says Cranfield.
USD/JPY traders prepare for Friday’s BoJ meeting
Bank of Japan (BOJ) Governor Kazuo Ueda noted it was “appropriate to keep easy monetary conditions for now as underlying inflation is still below 2.0%”. Ueda cautioned “If the price trend rises toward 2.0% in line with our outlook…it will mean raising the short-term interest rate,” according to a note by private investment bank Brown Brothers Harriman (BBH).
The Bank of Japan’s (BoJ) April policy meeting takes place on Friday. It is unlikely the BoJ will increase interest rates at the meeting but there is a chance it may reduce Japanese Government Bonds (JGB), which would be viewed as hawkish, JPY positive, and bearish for USD/JPY.
If the BoJ delivers a hawkish hold on Friday it is unlikely the Japanese authorities will intervene to prop up the Yen, according to BBH.
“The BOJ is widely expected to keep the policy rate target at 0 to 0.10%. However, the BOJ may raise slightly its 2024 core inflation projections implying greater room to tighten policy. Indeed, Japan’s April Jibun Bank Flash Composite PMI shows private sector growth quickening at the fastest pace in eight months and price pressures intensifying,” says BBH.
Data on the horizon
US data could further impact USD/JPY volatility during the week, with GDP on Thursday and Core Personal Consumptions – Price Index data on Friday.
In Japan, the Statistics Bureau of Japan will release the Tokyo Consumer Price Index just hours before Friday’s BoJ meeting.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.