Yen slides toward 160.00 with Fed speakers and US PPI ahead
- USD/JPY breaks out of a seven-week range to its highest since September 2.
- Fed and BoJ hikes expected in December would leave the rate gap unchanged.
- Japan reports October producer prices before the US figures on Friday.
The 160.00 level is within reach of USD/JPY for the first time since early September, with Fed speakers and US producer prices still to come before the weekend. USD/JPY has left the range it held for seven weeks and reached just under 160.00, its highest since September 2. It's trading a little below that high, near the top of Wednesday's range.
The October Consumer Price Index (CPI) beat forecasts with a 0.4% rise, and Fed Governor Waller called a hike at the December 8-9 meeting likely. Futures now give a quarter-point move there odds near 90%. The Fed's rate is 3.75%-4.00% against 1.25% at the Bank of Japan (BoJ), a gap of at least two and a half points that pays holders of Dollars over Yen.
The BoJ is expected to move too. BoJ board member Takata voted for 1.50% in October's 8-1 decision, and most economists expect the rest to join him at the December 17-18 meeting. A quarter-point from each central bank nine days apart would leave the gap, and the reason to hold Dollars over Yen, exactly where it is.
On the calendar
Japan's October corporate goods prices are due at 23:50 GMT on Wednesday, and third-quarter Gross Domestic Product (GDP) follows at 23:50 GMT on Sunday. Both feed the BoJ's December decision, the Japanese side of the gap.
US jobless claims come at 13:30 GMT on Thursday, with 195K forecast against 189K, and Cleveland Fed President Hammack opens a day of six Fed speeches at 14:00 GMT. The US Producer Price Index (PPI) for October lands at the same hour on Friday, with a 0.4% rise forecast against September's 1.3%. With a quarter-point Fed move priced, both bear on whether a half-point is possible.
On the charts
The break takes USD/JPY above the 156.00-159.00 range it had held since late September, and it has recovered nearly all of the fall from the September 2 high near 160.50 to the September low near 153.00. The last two times it traded above 160.00, at the end of July and at the start of September, it fell more than five Yen within a week.
USD/JPY daily chart
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.
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