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    Japanese Yen spikes to weekly top after BoJ Takata’s hawkish remarks, US PCE data in focus

    Source Fxstreet
    Feb 29, 2024 02:22
    • The Japanese Yen gains strong positive traction amid a softer risk tone and intervention fears.
    • The BoJ policy uncertainty could cap further gains and help limit losses for the USD/JPY pair.
    • Traders might also prefer to wait for the US PCE Price Index release before placing directional bets.

    The Japanese Yen (JPY) catches fresh bids during the Asian session on Thursday and rallies back closer to the top end of the weekly range against its American counterpart, though any further appreciating move still seems elusive. The nervousness ahead of the crucial US inflation data tempers investors' appetite for riskier assets, which is evident from a generally weaker tone around the equity markets and benefits the JPY's relative safe-haven status. This, along with speculations that Japanese authorities might intervene in the market to stem any further JPY weakness, offers additional support.

    That said, the uncertainty over the Bank of Japan's (BoJ) plans to exit its ultra-easy monetary policy might hold back bulls from placing aggressive bets around the JPY. Meanwhile, the US Dollar (USD) remains supported by bets that the Federal Reserve (Fed) will keep rates higher for longer, bolstered by comments from several FOMC officials. This might contribute to limiting the downside for the USD/JPY pair. Investors now look to the US Personal Consumption Expenditures (PCE) Price Index for cues about the Fed's rate-cut path, which should provide a fresh impetus to the currency pair.

    Daily digest market movers: Japanese Yen attracts haven flows amid fresh intervention warning and hawkish BoJ remarks

    • A slight deterioration in the global risk sentiment drives some haven flows towards the Japanese Yen amid intervention fears, though the Bank of Japan policy uncertainty might keep a lid on any further gains.
    • Japan's vice finance minister for international affairs, Masato Kanda, issued a fresh warning and said that the government stands ready to take appropriate action against excessive exchange-rate moves and volatility.
    • BoJ board member Hajime Takata said that achievement of the 2% inflation target is becoming within sight and that the central bank must consider taking a nimble and flexible approach towards an exit from ultra-loose monetary policy.
    • Slightly warmer consumer inflation in Japan fuelled speculations that the Bank of Japan will pivot away from its ultra-loose policy settings, though a recession could delay the central bank's plan to tighten its policy.
    • Official data released this Thursday showed that Japanese Retail Sales registered higher-than-expected growth of 2.3% over 12 months through January, while Industrial Production sank 7.5% during the reported month.
    • The second reading of the US GDP print published on Wednesday showed that the world's largest economy expanded by a 3.2% annualized pace during the fourth quarter vs the advance estimate of a 3.3% rise.
    • Nevertheless, the data suggested that the US economy remains in good shape, which, along with warnings from Federal Reserve officials, reiterating the higher-for-longer narrative, underpins the US Dollar.
    • New York Fed President John Williams said that the central bank is likely to begin cutting interest rates this year depending on how the data come in, though there is still a way to go before hitting the 2% inflation target.
    • Atlanta Fed President Raphael Bostic stressed that the US central bank has not declared victory over inflation yet and added that he is comfortable advising patience when it comes to loosening monetary policy.
    • Furthermore, Boston Fed Bank President Susan Collins noted that it will likely become appropriate to begin easing policy later this year but the path to returning inflation to its 2% target will likely continue to be bumpy.
    • This continues to act as a tailwind for the US Dollar and should lend some support to the USD/JPY pair ahead of the key US Personal Consumption Expenditures (PCE) Price Index – the Fed's preferred inflation gauge.
    • Thursday's US economic docket also features the release of the usual Weekly Initial Jobless Claims, the Chicago PMI and Pending Home Sales, which, along with Fed speak, might infuse some volatility in the markets.

    Technical analysis: USD/JPY retests the weekly low around the 150.00 mark, downside potential seems limited

    From a technical perspective, any further downfall is likely to find decent support near the weekly low, around the 150.00 psychological mark. The said handle should act as a key pivotal point, which if broken decisively might prompt fresh selling and drag the USD/JPY pair below the 149.70-149.65 region, towards the 149.35-149.30 intermediate support en route to the 149.00 round figure. A convincing break below the latter might shift the near-term bias in favour of bearish traders and pave the way for some meaningful downside.

    On the flip side, the 150.85-150.90 region, or a multi-month top, might continue to act as an immediate strong resistance, above which the USD/JPY pair could accelerate the positive move towards the 151.45 hurdle. The momentum could extend further and lift spot prices to the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and retested 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 Australian Dollar.

      USD EUR GBP CAD AUD JPY NZD CHF
    USD   0.06% -0.01% 0.00% -0.17% -0.37% -0.08% -0.03%
    EUR -0.07%   -0.07% -0.06% -0.22% -0.48% -0.13% -0.10%
    GBP 0.01% 0.07%   0.01% -0.15% -0.40% -0.07% -0.02%
    CAD 0.00% 0.08% -0.01%   -0.16% -0.41% -0.07% -0.03%
    AUD 0.17% 0.23% 0.15% 0.16%   -0.20% 0.10% 0.13%
    JPY 0.36% 0.46% 0.38% 0.40% 0.24%   0.37% 0.38%
    NZD 0.07% 0.13% 0.06% 0.07% -0.09% -0.34%   0.07%
    CHF 0.04% 0.11% 0.02% 0.03% -0.14% -0.33% -0.03%  

    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.

    Disclaimer: For information purposes only. Past performance is not indicative of future results.
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    USD/JPY is testing long-term highs at 154.78 with the BoJ on focus Nothing stops the US Dollar. Neither the moderate risk appetite seen on Monday nor the reiterated intervention warnings by diverse economic authorities, the Yen remains pinned to long-term lows near 155.00.
    Source  Fxstreet
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