- The Japanese yen is gaining ground as traders expect the BoJ to keep interest rates unchanged on Friday.
- Japan’s Consumer Price Index rose 3.0% year-on-year in August, hitting its highest level since October 2023.
- The US Dollar faces challenges due to increasing likelihood of additional Fed rate cuts in 2024.
The Japanese Yen (JPY) is lower against the US Dollar (USD) following the release of the National Consumer Price Index (CPI) data on Friday. Traders are now focused on the Bank of Japan (BoJ) policy decision later in the day, with expectations of maintaining its short-term interest rate target between 0.15% and 0.25%.
Japan’s Consumer Price Index (CPI) rose to 3.0% year-on-year in August from 2.8% previously, marking the highest level since October 2023. In addition, the National Core CPI excluding fresh food hit a six-month high of 2.8%, rising for the fourth consecutive month and in line with market expectations.
The USD/JPY pair’s decline is supported by a weaker US Dollar (USD) as expectations grow for additional rate cuts by the US Federal Reserve (Fed) by the end of 2024. The latest dot plot projections indicate a gradual easing cycle, with the 2024 median rate revised to 4.375%, from 5.125% forecast in June.
However, Federal Reserve Chairman Jerome Powell said at the post-meeting press conference that the Fed is in no rush to ease policy, stressing that half-percentage point rate cuts are not the “new pace.”
Daily Market Wrap: Japanese Yen Appreciates on Bolivarian BoJ
- U.S. Treasury Secretary Janet Yellen said on Friday that the Federal Reserve’s recent interest rate cut is a very positive indicator for the U.S. economy. According to Yellen, this demonstrates the Fed’s confidence that inflation has significantly decreased and is moving toward the 2% target. Meanwhile, the labor market continues to show strength.
- The Federal Open Market Committee (FOMC) lowered the federal funds rate to a range of 4.75% to 5.0%, marking the Fed’s first rate cut in more than four years. Fed policymakers updated their quarterly economic forecasts, raising the median unemployment projection to 4.4% by the end of 2024, from 4.0% in June. They also raised their longer-term projection for the federal funds rate to 2.9% from 2.8%.
- Federal Reserve Chairman Jerome Powell commented on the aggressive 50 basis point rate cut, saying, “This decision reflects our increased confidence that, with the right adjustments to our policy approach, we can maintain a strong labor market, achieve moderate economic growth, and bring inflation to a sustainable level of 2 percent.”
- Japan’s merchandise trade balance posted a wider trade deficit of 695.30 billion yen in August, up from 628.70 billion yen in the previous month, but well below market expectations for a 1.38 trillion yen deficit. Exports rose 5.6% year-on-year, marking the ninth consecutive month of growth, but fell short of the anticipated 10.0% increase. Imports rose just 2.3%, the slowest pace in five months, well below the projected 13.4% increase.
- Japan’s Finance Minister Shunichi Suzuki said on Tuesday that rapid fluctuations in the foreign exchange rate (FX) are undesirable. Suzuki stressed that officials will closely monitor how FX movements affect the Japanese economy and people’s livelihoods. The government will continue to assess the impact of a stronger Japanese Yen and respond accordingly, according to Reuters.
- Commerzbank FX analyst Volkmar Baur anticipated that the Bank of Japan will remain on the sidelines this week. Baur noted that the Federal Reserve’s actions will likely have a bigger impact on the USD/JPY pair, suggesting that the JPY could have a strong chance of falling below 140.00 per USD even without a BoJ rate hike.
Technical Analysis: USD/JPY drops towards 142.00; further downside seems possible due to bearish bias
USD/JPY is trading around 142.30 on Friday. The daily chart analysis indicates that the pair is consolidating within a descending channel, which supports a bearish bias. However, the 14-day Relative Strength Index (RSI) remains below the 50 level, confirming an ongoing bearish outlook.
On the downside, the USD/JPY pair could find immediate support at 139.58, which is the lowest level since June 2023, followed by the lower boundary of the descending channel near 137.50.
On the resistance side, the 21-day exponential moving average (EMA) at the level of 143.56 acts as an initial barrier, followed by the upper boundary of the descending channel around the level of 144.80.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.02% | 0.05% | -0.16% | 0.06% | 0.17% | 0.12% | -0.13% | |
| EUR | -0.02% | 0.02% | -0.17% | 0.02% | 0.15% | 0.10% | -0.16% | |
| GBP | -0.05% | -0.02% | -0.19% | 0.03% | 0.14% | 0.08% | -0.15% | |
| JPY | 0.16% | 0.17% | 0.19% | 0.24% | 0.34% | 0.29% | 0.06% | |
| CAD | -0.06% | -0.02% | -0.03% | -0.24% | 0.10% | 0.07% | -0.17% | |
| AUD | -0.17% | -0.15% | -0.14% | -0.34% | -0.10% | -0.02% | -0.27% | |
| NZD | -0.12% | -0.10% | -0.08% | -0.29% | -0.07% | 0.02% | -0.25% | |
| CHF | 0.13% | 0.16% | 0.15% | -0.06% | 0.17% | 0.27% | 0.25% |
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 fight 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.
