- The Japanese Yen loses ground as the BoJ’s Summary of Opinions signals its intention to maintain an accommodative monetary stance.
- The JPY struggled as Japan’s next Prime Minister Ishiba declared the need to keep rates low to aid economic recovery.
- The US dollar receives support as traders adopt caution amid rising geopolitical tension in the Middle East.
The Japanese Yen (JPY) declines against the US Dollar (USD) on Wednesday due to growing doubts about further interest rate hikes by the Bank of Japan (BoJ). On Tuesday, the BoJ’s Summary of Views from the September Monetary Policy Meeting indicated that there are no immediate plans for additional rate hikes. The central bank intends to maintain its accommodative stance but remains open to adjustments if economic conditions show significant improvement.
Japan’s next prime minister, Shigeru Ishiba, declared on Sunday that the country’s monetary policy should remain accommodative, signaling the need to keep borrowing costs low to support a fragile economic recovery. This has pressured the Japanese Yen and supported the USD/JPY pair.
The US dollar receives support from cautious sentiment in the market amid escalating tensions in the Middle East. However, the weaker-than-expected September ISM Manufacturing PMI could have put downward pressure on the Dollar. Traders will now focus on the upcoming ADP US employment change report and Fed speeches for further direction.
Daily Market Summary: Japanese Yen Depreciates as BoJ Rate Hike Chances Decrease
- The CME FedWatch tool indicates that markets assign a 63.1% probability to a 25 basis point rate cut by the Federal Reserve in November, while the probability of a 50 basis point cut is 36.9 %, down from 58.2% a week ago.
- Iran launched more than 200 ballistic missiles at Israel, prompting Prime Minister Benjamin Netanyahu to vow retaliation against Tehran for Tuesday’s attack. In response, Iran warned that any counterattack would lead to “massive destruction,” raising concerns of a broader conflict.
- The US ISM Manufacturing PMI stood at 47.2 for September, matching the August reading but below the market expectation of 47.5.
- Japan’s Tankan index of large manufacturers showed that overall business conditions for large manufacturing companies remained stable at 13 points in the third quarter, in line with expectations. Additionally, Japan’s unemployment rate fell to 2.5% in August, from 2.7% in July, better than the market forecast of 2.6%, data showed on Tuesday.
- Federal Reserve (Fed) Chairman Jerome Powell said on Monday that the central bank is in no hurry and will reduce its reference rate “over time.” Fed Chair Powell added that the recent 50 basis point rate cut should not be seen as an indication of similarly aggressive future actions, noting that upcoming rate changes will likely be more modest.
- St. Louis Federal Reserve President Alberto Musalem said Friday, according to the Financial Times, that the Fed should begin cutting interest rates “gradually” following a larger-than-usual half-point reduction at the meeting. of September. Musalem acknowledged the possibility of the economy weakening more than anticipated, saying: “If that were the case, then a faster pace of rate reductions might be appropriate.”
- Last week, minutes from the BoJ’s Monetary Policy Meeting expressed members’ consensus on the importance of remaining vigilant about the risks of inflation overshooting targets. Several members indicated that raising rates to 0.25% would be appropriate as a way to adjust the level of monetary support. Some others suggested that a moderate adjustment of monetary support would also be appropriate.
Technical Analysis: USD/JPY holds above 143.50, nine-day EMA
USD/JPY is trading around 143.80 on Wednesday. Daily chart analysis indicates that the pair is consolidating within an ascending channel pattern, suggesting a bullish bias. The 14-day Relative Strength Index (RSI) also remains slightly below the 50 level. A break above this threshold could further confirm the continuation of the uptrend.
The USD/JPY pair could find resistance near the upper boundary of the ascending channel at 146.80, followed by the five-week high of 147.21, last reached on September 3.
To the downside, immediate support appears at the nine-day EMA around 143.50, followed by the lower boundary of the ascending channel at 143.00. A break below this level could push the USD/JPY towards the 139.58 level, marking the lowest level since June 2023.
USD/JPY: Daily Chart
Japanese Yen PRICE Today
The table below shows the percentage change of the Japanese Yen (JPY) against major currencies today. Japanese Yen was the weakest currency against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.05% | -0.06% | 0.14% | -0.07% | -0.23% | -0.33% | -0.07% | |
| EUR | 0.05% | -0.02% | 0.22% | -0.05% | -0.19% | -0.28% | -0.02% | |
| GBP | 0.06% | 0.02% | 0.19% | -0.03% | -0.17% | -0.27% | -0.00% | |
| JPY | -0.14% | -0.22% | -0.19% | -0.16% | -0.38% | -0.49% | -0.22% | |
| CAD | 0.07% | 0.05% | 0.03% | 0.16% | -0.17% | -0.26% | 0.00% | |
| AUD | 0.23% | 0.19% | 0.17% | 0.38% | 0.17% | -0.10% | 0.17% | |
| NZD | 0.33% | 0.28% | 0.27% | 0.49% | 0.26% | 0.10% | 0.27% | |
| CHF | 0.07% | 0.02% | 0.00% | 0.22% | -0.00% | -0.17% | -0.27% |
The heat map shows percentage changes for major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box will represent the JPY (base)/USD (quote).
The Japanese Yen FAQs
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of Japanese and US bonds or the risk sentiment among traders, among other factors.
One of the mandates of the Bank of Japan is currency control, so its movements are key for the Yen. The BoJ has intervened directly in currency markets on occasion, usually to lower the value of the Yen, although it often refrains from doing so due to the political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the depreciation of the Yen against its main currency pairs. This process has been exacerbated more recently by a growing policy divergence between the Bank of Japan and other major central banks, which have opted to sharply raise interest rates to combat decades-old levels of inflation.
The Bank of Japan’s ultra-loose monetary policy stance has led to increased policy divergence with other central banks, particularly the US Federal Reserve. This favors the widening of the spread between US and Japanese 10-year bonds, which favors the Dollar against the Yen.
The Japanese Yen is often considered 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. In turbulent times, the Yen is likely to appreciate against other currencies that are considered riskier to invest in.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
