- The Japanese Yen strengthens as foreign investors anticipate that the BoJ will raise rates in July.
- The yield on the 10-year Japanese government bond is holding steady at around 1.09%, close to its recent high of 1.10%.
- Fed Chairman Powell stressed the urgent need to monitor the deteriorating labor market.
The Japanese Yen (JPY) halted its three-day losing streak on Thursday. This rally is likely due to growing speculation that the Bank of Japan (BoJ) may raise interest rates at its upcoming meeting in July. This development supported the JPY while weakening the USD/JPY pair.
The yield on the Japanese 10-year government bond is holding steady at around 1.09%, close to its peak of 1.1% hit on July 3. The stability comes amid selling pressure on Japanese government bonds, reflecting foreign investors’ anticipation that the Bank of Japan could raise interest rates in response to a weakening Japanese yen, Nikkei Asia reported.
The US Dollar (USD) weakened, likely impacted by lower US Treasury yields. Fed Chair Jerome Powell stressed the urgent need to monitor the deteriorating labor market on Wednesday, while expressing optimism about the downward trajectory of inflation.
Traders are now looking ahead to the upcoming US Consumer Price Index (CPI) data for June, scheduled for release on Thursday, for further clarity on the direction of the Federal Reserve’s (Fed) monetary policy.
Daily Market Wrap: Japanese Yen improves amid hawkish sentiment around BoJ
- Peter Boockvar, chief financial officer of U.S. financial group Bleakley Financial Group, said that the weaker yen would trigger the BoJ to “react sooner rather than later,” according to Reuters.
- Reuters reported on Wednesday, citing unnamed sources, that the Bank of Japan is likely to cut this year’s economic growth forecast and project inflation to remain around its 2% target in coming years at its meeting this month.
- Fed Chairman Jerome Powell said in testimony before Congress on Tuesday: “More good data would strengthen our confidence in inflation.” Powell stressed that “a policy rate cut is not appropriate until the Fed gains greater confidence that inflation is sustainably headed toward 2%.” He also noted that “first quarter data did not support the increased confidence in the path of inflation that the Fed needs to cut rates.”
- According to a Bloomberg report on Tuesday, the Bank of Japan is holding three face-to-face meetings with banks, securities firms and financial institutions in the coming days. The purpose of these meetings is to assess a feasible pace for reducing its purchases of Japanese Government Bonds.
- On Tuesday, Japanese Finance Minister Shunichi Suzuki stressed the importance of maintaining fiscal discipline to bolster confidence in long-term fiscal health. Suzuki also said he would closely monitor discussions at the BoJ meeting on the bond market, Reuters reported.
- The Japanese Yen may struggle due to purchases of overseas assets by Japanese individuals through the recently revamped tax-free investment scheme, the Nippon Individual Savings Account (NISA) program. According to Nikkei Asia, the scale of these purchases is expected to exceed the country’s trade deficit during the first half of this year.
- Japan’s Finance Ministry said Monday that Japanese investment fund management companies and asset management firms bought 6.16 trillion yen ($38 billion) more in overseas stocks and mutual fund shares than they sold during the first six months of the year.
Technical Analysis: USD/JPY holds around 161.50
USD/JPY is trading around 161.60 on Thursday, maintaining an upward trajectory within an ascending channel pattern, indicating a bullish bias according to the daily chart analysis. Supporting this outlook, the 14-day Relative Strength Index (RSI) is hovering just below the 70 level, suggesting potential overbought conditions. A break above this level could signal the need for caution and a possible correction.
The USD/JPY pair could target psychological resistance near 163.00, located at the upper boundary of the ascending channel. A successful break above this level could reinforce the bullish sentiment, potentially pushing the pair towards significant resistance around 163.50.
On the contrary, initial support is expected around the 21-day exponential moving average (EMA) at 160.13. A drop below this level could trigger selling pressure, testing the lower boundary of the ascending channel near the psychological level of 160.00. A further drop below this channel support could lead the pair to revisit the June low around 154.55.
USD/JPY: Daily Chart
Japanese Yen PRICE Today
The table below shows the Japanese Yen (JPY) exchange rate against major currencies today. The Japanese Yen was the strongest currency against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.08% | -0.11% | -0.08% | -0.04% | -0.23% | -0.23% | -0.10% | |
| EUR | 0.08% | -0.02% | 0.00% | 0.08% | -0.14% | -0.15% | -0.01% | |
| GBP | 0.11% | 0.02% | 0.04% | 0.08% | -0.12% | -0.13% | 0.03% | |
| JPY | 0.08% | 0.00% | -0.04% | 0.03% | -0.16% | -0.21% | -0.02% | |
| CAD | 0.04% | -0.08% | -0.08% | -0.03% | -0.22% | -0.22% | -0.06% | |
| AUD | 0.23% | 0.14% | 0.12% | 0.16% | 0.22% | -0.02% | 0.14% | |
| NZD | 0.23% | 0.15% | 0.13% | 0.21% | 0.22% | 0.02% | 0.16% | |
| CHF | 0.10% | 0.01% | -0.03% | 0.02% | 0.06% | -0.14% | -0.16% |
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).
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets the country’s monetary policy. Its mandate is to issue banknotes and carry out monetary and foreign exchange control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has been pursuing ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflation environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing money to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further relaxed policy by first introducing negative interest rates and then directly controlling the yield on its 10-year government bonds.
The Bank of Japan’s massive stimulus 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 Bank of Japan and other major central banks, which have opted to sharply raise interest rates to combat decades-high inflation. The Bank of Japan’s policy of keeping rates low has led to a widening spread with other currencies, dragging down the value of the Yen.
The weak yen and the surge in global energy prices have caused Japanese inflation to rise, exceeding the Bank of Japan’s 2% target. However, the Bank of Japan judges that a sustainable and stable achievement of the 2% target is still not in sight, so a sharp change in current monetary policy seems unlikely.
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.
