Japanese Yen extends losses despite a hawkish sentiment surrounding the BoJ
- The Japanese Yen declines despite a hawkish mood surrounding the BoJ’s policy outlook.
- The downside of the JPY could be limited as traders expect the BoJ to increase interest rates further.
- US Fed Chair Powell signaled a rate cut soon, which puts downward pressure on the US Dollar.
The Japanese Yen (JPY) continues to lose ground against the US Dollar (USD) for the second consecutive day on Tuesday. However, the downside of the JPY could be restrained due to the hawkish mood surrounding the Bank of Japan (BoJ).
Additionally, the contrasting statements from the BoJ and the Federal Reserve (Fed) regarding their policy outlooks are putting downward pressure on the USD/JPY pair. BoJ Governor Kazuo Ueda stated in Parliament on Friday that the central bank could raise interest rates further if its economic projections are accurate.
Meanwhile, Fed Chair Jerome Powell stated at the Jackson Hole Symposium, "The time has come for policy to adjust." However, Powell did not specify when rate cuts would begin or their potential size. Additionally, San Francisco Federal Reserve President Mary Daly stated on Monday in an interview with Bloomberg TV that "the time is upon us" to begin cutting interest rates, likely starting with a quarter-percentage point reduction.
Daily Digest Market Movers: Japanese Yen edges lower despite a hawkish BoJ
- According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting.
- Japan’s Finance Minister Shunichi Suzuki stated on Tuesday that foreign exchange rates are influenced by a variety of factors, including monetary policies, interest rate differentials, geopolitical risks, and market sentiment. Suzuki added that it is difficult to predict how these factors will impact FX rates.
- US Durable Goods Orders surged by 9.9% month-over-month in July, rebounding from a 6.9% decline in June. This increase significantly outpaced the expected 4.0% rise, marking the largest gain since May 2020.
- Bloomberg reported on Friday that Philadelphia Fed President Patrick Harker emphasized the need for the US central bank to lower interest rates gradually. Meanwhile, Reuters reported that Chicago Fed President Austan Goolsbee noted that monetary policy is currently at its most restrictive, with the Fed now focusing on achieving its employment mandate.
- Bank of Japan (BoJ) Governor Kazuo Ueda addressed the Japanese parliament on Friday, stating that he is “not considering selling long-term Japanese government bonds (JGBs) as a tool for adjusting interest rates.” He noted that any reduction in JGB purchases would only account for about 7-8% of the balance sheet, which is a relatively small decrease. Ueda added that if the economy aligns with their projections, there could be a phase where they might adjust interest rates slightly further.
- Japan’s National Consumer Price Index increased by 2.8% year-on-year in July, maintaining this rate for the third consecutive month and remaining at its highest level since February. Additionally, the National CPI excluding Fresh Food rose by 2.7%, the highest reading since February, aligning with expectations.
- The US Composite PMI edged down to 54.1 in August, a four-month low, from 54.3 in July, but remained above market expectations of 53.5. This indicates continued expansion in US business activity, marking 19 consecutive months of growth.
- FOMC Minutes for July’s policy meeting indicated that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming meeting in September as long as inflation continued to cool.
Technical Analysis: USD/JPY tests a psychological level at 145.00
USD/JPY trades around 144.90 on Tuesday. Analysis of the daily chart shows that the pair is testing the downtrend line, suggesting a weakening bearish bias. However, the 14-day Relative Strength Index (RSI) remains slightly above 30, suggesting a confirmation of a bearish trend.
On the downside, if the USD/JPY pair stays below the downtrend line, it could hover around the seven-month low of 141.69, recorded on August 5. A break below this level might push the pair toward the throwback support at 140.25.
In terms of resistance, the USD/JPY pair may challenge the immediate barrier at the nine-day Exponential Moving Average (EMA) around the 145.67 level. A breakthrough above this level could pave the way for the pair to explore the area near the throwback-turned-resistance at 154.50.
USD/JPY: Daily Chart
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.07% | -0.02% | 0.20% | -0.05% | -0.11% | -0.12% | -0.00% | |
| EUR | 0.07% | 0.05% | 0.26% | 0.00% | -0.03% | -0.07% | 0.07% | |
| GBP | 0.02% | -0.05% | 0.23% | -0.02% | -0.08% | -0.10% | 0.02% | |
| JPY | -0.20% | -0.26% | -0.23% | -0.25% | -0.31% | -0.34% | -0.21% | |
| CAD | 0.05% | -0.01% | 0.02% | 0.25% | -0.06% | -0.08% | 0.06% | |
| AUD | 0.11% | 0.03% | 0.08% | 0.31% | 0.06% | -0.04% | 0.11% | |
| NZD | 0.12% | 0.07% | 0.10% | 0.34% | 0.08% | 0.04% | 0.12% | |
| CHF | 0.00% | -0.07% | -0.02% | 0.21% | -0.06% | -0.11% | -0.12% |
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).
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.