USD/JPY holds losses near 158.00 amid growing intervention rumours
- USD/JPY holds daily losses near 158.00 after a sharp whipsaw.
- Wild Yen swings earlier on Friday have raised speculation about a "rate check" by Japanese authorities.
- The US Dollar remains on its back foot, weighed by concerns about the US-EU tensions.
The US Dollar is trading near the 158.00 level against the Japanese Yen at the time of writing, after pulling back from session highs above 159.20. Yen crosses whipsawed without an apparent fundamental reason, following the press release of the Bank of Japan’s Governor Kazuho Ueda earlier on Friday, which triggered speculation of a “rate check.”
This process consists of calls from Tokyo authorities to the country’s major commercial banks requesting Yen quotes, a move that often anticipates an immediate intervention in foreign exchange markets.
Previously, the Yen had been depreciating across the board, following the BoJ’s decision to keep interest rates on hold at 0.75%, an outcome widely expected by the market.
BoJ Governor Ueda conveyed a moderately hawkish message, noting that inflation is approaching the 2% target, which would back further monetary tightening in the mid-term. Ueda also stated that the bank needs to fully grasp the implications of previous rate hikes before tightening rates further.
The US Dollar is not at its best moment either. The USD Index is on track to close its worst week since June, hammered by the US-EU tensions about Greenland. The strong US GDP and sticky inflation figures released on Thursday failed to support the US Dollar, and the focus on Friday turns to the US Flash PMIs, which are expected to show a moderate improvement in
Japanese Yen FAQs
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.
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 BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, 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 supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
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.
business activity in January.
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