The Japanese Yen (JPY) has trimmed its intraday losses but remains weaker against the US Dollar (USD) on Thursday. Despite the US Federal Reserve’s (Fed) aggressive 50 basis point (bps) interest rate cut on Wednesday, the risk-sensitive JPY continued to depreciate.
Traders are now focusing on the Bank of Japan (BoJ) policy decision scheduled for Friday, with expectations that rates will be kept unchanged while leaving room for potential future rate hikes. Additionally, Japan’s National Consumer Price Index (CPI) data will be closely watched, as the inflation report could provide new insights into the BoJ’s future interest rate path.
The USD/JPY pair's upside could be attributed to remarks made by Fed Chair Jerome Powell. In the post-meeting press conference, Powell stated that the Fed is not in a hurry to ease policy and emphasized that half-percentage point rate cuts are not the "new pace."
Fed policymakers updated their quarterly economic forecasts, increasing the median projection for unemployment to 4.4% by the end of 2024, up from the 4.0% estimate made in June. They also raised their long-term projection for the federal funds rate from 2.8% to 2.9%.
USD/JPY trades around 143.00 on Thursday. Analysis of the daily chart indicates that the pair is consolidating within a descending channel, which supports a bearish outlook. However, the 14-day Relative Strength Index (RSI) is rising toward the 50 level, and the price has moved above the nine-day Exponential Moving Average (EMA), suggesting a potential upward correction.
On the upside, the USD/JPY pair may initially face resistance at the 21-day EMA, located at the 143.73 level, and then at the upper boundary of the descending channel around 145.00.
For support, the USD/JPY pair might find immediate support at 139.58, which is the lowest level since June 2023, followed by the lower boundary of the descending channel near 137.75.
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.02% | 0.07% | 0.67% | -0.01% | -0.37% | -0.05% | 0.31% | |
EUR | -0.02% | 0.04% | 0.67% | -0.02% | -0.36% | -0.06% | 0.32% | |
GBP | -0.07% | -0.04% | 0.62% | -0.08% | -0.43% | -0.11% | 0.24% | |
JPY | -0.67% | -0.67% | -0.62% | -0.67% | -1.04% | -0.76% | -0.38% | |
CAD | 0.01% | 0.02% | 0.08% | 0.67% | -0.35% | -0.03% | 0.31% | |
AUD | 0.37% | 0.36% | 0.43% | 1.04% | 0.35% | 0.32% | 0.67% | |
NZD | 0.05% | 0.06% | 0.11% | 0.76% | 0.03% | -0.32% | 0.36% | |
CHF | -0.31% | -0.32% | -0.24% | 0.38% | -0.31% | -0.67% | -0.36% |
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).
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 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.
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.
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.