- The Japanese Yen weakened following the release of trade balance data on Wednesday.
- Japan’s merchandise trade balance posted a deficit of ¥621.84 billion in July, turning around from a surplus of ¥224.0 billion in June.
- The US Dollar remains firm due to market caution ahead of the FOMC meeting minutes.
The Japanese Yen (JPY) halted its three-day winning streak against the US Dollar (USD) following the release of trade balance data on Wednesday. However, the JPY’s downside could be limited due to the increasing likelihood of another interest rate hike in the near term. Traders are also anticipating Bank of Japan (BoJ) Governor Kazuo Ueda’s appearance in parliament on Friday, where he will discuss the central bank’s decision last month to raise interest rates.
Japan’s merchandise trade balance fell to a deficit of ¥621.84 billion in July, reversing the ¥224.0 billion surplus reported in June and missing market estimates of a ¥330.7 billion deficit. This is the fifth deficit so far this year as imports rose at a much faster pace than exports.
The US Dollar (USD) is attempting to halt its three-day losing streak as traders remain cautious ahead of the July FOMC meeting minutes due on Wednesday. Additionally, traders are looking ahead to Fed Chair Jerome Powell’s upcoming speech at Jackson Hole on Friday.
The CME’s FedWatch tool suggests markets now price in a nearly 67.5% chance of a 25 basis point (bps) Fed rate cut at its September meeting, up from 76% a day earlier. The probability of a 50 basis point rate cut fell to 32.5% from 53.0% a week earlier.
Daily Market Drivers Roundup: Japanese Yen Weakens Following Trade Balance Data
- More than half of economists expect the Bank of Japan (BoJ) to raise interest rates again before the end of the year, according to a Reuters poll released on Wednesday. In the Aug. 13-19 survey, 31 of 54 economists predicted the BoJ would raise borrowing costs by the end of the year. The median forecast for the year-end rate is 0.50%, an increase of 25 basis points.
- Japan’s imports rose 16.6% year-on-year in July to a 19-month high of ¥10,241.01 billion, beating market expectations of 14.9% and significantly above the 3.2% increase in June. This is the largest import growth since January 2023. Meanwhile, exports rose 10.3% year-on-year to a seven-month high of ¥9,619.17 billion, accelerating from the previous month’s 5.4% growth but below market forecasts of 11.4%.
- Federal Reserve Governor Michelle Bowman expressed caution on Tuesday about making any policy changes, citing upside risks to inflation. Bowman warned that overreacting to individual data points could undermine progress already made, according to Reuters.
- According to Reuters, the Bank of Japan (BoJ) had projected that a strong economic recovery would help inflation reach its 2% target sustainably. This would justify further interest rate increases, following last month’s hike as part of the BoJ’s ongoing effort to undo years of extensive monetary stimulus.
- San Francisco Federal Reserve Bank President Mary Daly stressed on Sunday that the U.S. central bank should take a gradual approach to lowering borrowing costs, according to the Financial Times. In addition, Chicago Federal Reserve Bank President Austan Goolsbee warned that central bank officials should be cautious about keeping policy tight longer than necessary, according to CNBC.
- On Thursday, Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, said the reports are generally positive and “support the BoJ’s view and bode well for further rate hikes, although the central bank is expected to remain cautious as the latest rate hike triggered a sharp rally in the yen.”
- Japan’s gross domestic product (GDP) grew by 0.8% quarter-on-quarter in the second quarter, beating market forecasts of 0.5% and rebounding from a 0.6% contraction in the first quarter. This was the strongest quarterly growth since the first quarter of 2023. Meanwhile, annualized GDP growth reached 3.1%, beating the market consensus of 2.1% and reversing a 2.3% contraction in the first quarter. This was the strongest annual expansion since the second quarter of 2023.
- Rabobank senior FX strategist Jane Foley notes that this week’s raft of US data releases, coupled with next week’s Jackson Hole event, should provide the market with a clearer view of the likely responses from US policymakers. However, her main expectation is that the Fed will cut rates by 25 basis points in September and will likely cut them again before the end of the year.
Technical Analysis: USD/JPY rises near 145.50
The USD/JPY is trading around 145.50 on Wednesday. The daily chart analysis shows that the pair is consolidating under a descending trend line, which suggests a bearish bias. Moreover, the 14-day Relative Strength Index (RSI) is slightly above 30, which suggests a possible correction for the pair.
As for the support levels, the USD/JPY pair could navigate the region around the round numbers at 144.00 before 143.00 ahead of a seven-month low of 141.69, recorded on August 5. A further decline could lead the pair towards the next significant support level at 140.25.
On the upside, the USD/JPY pair could find immediate resistance at the downtrend line around the nine-day exponential moving average (EMA) at the level of 146.80. A break above this level could lead the pair to test the resistance level at 154.50, which has turned from a previous support to a current resistance.
USD/JPY: Daily Chart
Japanese Yen PRICE Today
The table below shows the Japanese Yen (JPY) exchange rate against major currencies today. Japanese Yen was the strongest currency against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.08% | 0.06% | 0.12% | -0.04% | -0.00% | 0.15% | -0.00% | |
| EUR | -0.08% | -0.04% | 0.05% | -0.12% | -0.06% | 0.05% | -0.09% | |
| GBP | -0.06% | 0.04% | 0.09% | -0.06% | -0.05% | 0.09% | -0.03% | |
| JPY | -0.12% | -0.05% | -0.09% | -0.16% | -0.10% | -0.02% | -0.11% | |
| CAD | 0.04% | 0.12% | 0.06% | 0.16% | 0.05% | 0.15% | 0.03% | |
| AUD | 0.00% | 0.06% | 0.05% | 0.10% | -0.05% | 0.11% | -0.00% | |
| NZD | -0.15% | -0.05% | -0.09% | 0.02% | -0.15% | -0.11% | -0.12% | |
| CHF | 0.00% | 0.09% | 0.03% | 0.11% | -0.03% | 0.00% | 0.12% |
The heatmap shows percentage changes of 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 chart will represent the JPY (base)/USD (quote).
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 spread between Japanese and US bond yields, and risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key to 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 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 Yen to depreciate against its major currency peers. This process has been exacerbated more recently by a growing policy divergence between the BoJ 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 stance of maintaining an ultra-loose monetary policy has led to an increase in policy divergence with other central banks, in particular with the US Federal Reserve. This favours the widening of the spread between US and Japanese 10-year bonds, which favours 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 into the Japanese currency due to its perceived 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.
