- The Japanese Yen attracts haven flows on Tuesday amid a cautious mood around the equity markets.
- Retreating US bond yields prompts some USD selling and also exerts pressure on the USD/JPY pair.
- Hawkish Fed expectations act as a tailwind for the buck and should help limit any meaningful decline.
The Japanese Yen (JPY) trades with a mild positive bias against its American counterpart through the early European session on Tuesday, albeit lacks follow-through and remains well within the striking distance of the YTD low touched the previous day. Reports that a Chinese sovereign fund vowed to conduct more buying led to some stability in the equity markets and turn out to be a key factor capping gains for the safe-haven JPY. Furthermore, the US Dollar (USD) profit-taking slide from almost a three-month peak remains shallow amid growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer in the wake of a still resilient economy. This, in turn, is seen as a key factor acting as a tailwind for the USD/JPY pair.
That said, the Bank of Japan’s (BoJ) hawkish tilt earlier this month, signalling conviction on hitting inflation goal and setting the stage to pull interest rates out of negative territory at its upcoming meetings in March or April, acts as a tailwind for the JPY. This, along with worries about geopolitical tensions stemming from conflicts in the Middle East and slowing economic growth in China, should help limit losses for the JPY and cap any meaningful appreciating move for the USD/JPY pair. This warrants some caution before placing aggressive directional bets in the absence of any relevant market-moving economic releases from the US. That said, speeches by influential FOMC members might infuse volatility and provide a fresh impetus to the pair.
Daily Digest Market Movers: Japanese Yen fails to attract meaningful buying amid hawkish Fed expectations
- A combination of factors lends some support to the Japanese Yen and keeps a lid on the USD/JPY pair’s two-day-old upward trajectory to its highest level since late November touched on Monday.
- The market sentiment remains fragile on the back of persistent worries about the risk of a further escalation of geopolitical tensions in the Middle East and slowing economic growth in China.
- China’s Central Huijin Investment company reportedly said that it will increase its investment in Chinese stock ETFs and are determined to safeguard the stable operation of the market.
- The Bank of Japan signalled earlier this month that conditions for phasing out huge stimulus and pulling short-term interest rates out of negative territory were falling into place.
- Japan’s real wages fell for a 21st straight month, though at a slower pace, by 1.9% in December from a year earlier, while household spending dropped for a tenth consecutive month.
- Investors continue to scale back their expectations regarding the timing and pace of interest rate cuts by the Federal Reserve in the wake of a still resilient US economy.
- Against the backdrop of Friday’s blockbuster US NFP report, the Institute for Supply Management (ISM) reported on Monday that the US services sector growth picked up in January.
- The ISM Non-Manufacturing PMI increased to 53.4 last month from 50.5 in December, suggesting that growth momentum from the fourth quarter spilled over into the new year.
- The CME Group’s Fedwatch tool indicates that traders have now almost entirely negated bets on a March rate cut and now see just five cuts for this year compared with six previously.
- The yield on the rate-sensitive 2-year US government bond climbed to a one-month high and the benchmark 10-year US Treasury yield holds comfortably above the 4.0% mark, underpinning the US Dollar.
- Minneapolis Fed President Neel Kashkari argued that a possibly higher neutral rate means that the central bank can take more time to assess upcoming data before beginning interest rate cuts.
- Chicago Fed President Austan Goolsbee noted that the economy has been strong and that there have been seven months of good inflation reports, though did not comment on the timing of the first rate cut.
- A slew of influential FOMC members are scheduled to speak again on Tuesday, which will play a key role in driving the USD demand and provide some meaningful impetus to the USD/JPY pair.
Technical Analysis: USD/JPY bulls await a breakout through the 148.75-148.80 multiple-tops barrier
From a technical perspective, bulls need to wait for a sustained breakout through the 148.75-148.80 multiple-tops resistance before placing fresh bets. Given that oscillators on the daily chart are holding comfortably in the positive territory and still far from being in the overbought zone, some follow-through buying beyond the 149.00 round figure will set the stage for additional gains. The USD/JPY pair might then aim back to reclaim the 150.00 psychological mark with some intermediate resistance near the 149.60-149.70 region.
On the flip side, the 148.00 mark now seems to protect the immediate downside. Any further decline is more likely to attract fresh buyers and remain limited near the 100-day Simple Moving Average (SMA), currently pegged near the 147.60-147.55 zone. A convincing break below the latter, however, might prompt aggressive technical selling and drag the USD/JPY pair below the 147.00 mark, towards the next relevant support near the 146.75-146.70 region. The downfall could extend further towards the 146.40 zone en route to sub-146.00 levels, or last week’s swing low.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.03% | -0.10% | -0.15% | -0.20% | -0.08% | -0.21% | -0.02% | |
| EUR | 0.03% | -0.06% | -0.12% | -0.16% | -0.05% | -0.17% | 0.01% | |
| GBP | 0.09% | 0.06% | -0.06% | -0.12% | -0.01% | -0.12% | 0.07% | |
| CAD | 0.14% | 0.12% | 0.06% | -0.06% | 0.07% | -0.06% | 0.13% | |
| AUD | 0.20% | 0.18% | 0.12% | 0.06% | 0.12% | -0.01% | 0.19% | |
| JPY | 0.08% | 0.07% | 0.00% | -0.07% | -0.12% | -0.13% | 0.07% | |
| NZD | 0.23% | 0.19% | 0.13% | 0.07% | 0.02% | 0.14% | 0.21% | |
| CHF | 0.02% | -0.01% | -0.08% | -0.13% | -0.19% | -0.07% | -0.20% |
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
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.
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