- The Japanese Yen fell on low trading volume as traders observed the Mountain Day holiday in Japan.
- The US Dollar is supported by lower chances of Fed rate cuts following positive US data last week.
- Safe-haven flows may limit JPY’s downside amid rising geopolitical tensions.
The Japanese Yen (JPY) is retracing its recent gains against the US Dollar (USD), with trading volumes likely to be light as Japanese markets are closed for Mountain Day. Support for the USD/JPY pair comes from stronger-than-expected US economic data released last week, leading traders to reduce their expectations for interest rate cuts by the US Federal Reserve.
On Sunday, Federal Reserve Governor Michelle Bowman said she continues to see upside risks to inflation and continued strength in the labor market. Bowman suggested the Fed may not be ready to cut rates at its next meeting in September, according to Bloomberg.
The CME FedWatch tool indicates a 46.5% probability of a 50 basis point rate cut by the Fed at its September meeting, down significantly from the 74.0% probability reported a week ago.
Last week, Japan’s monetary policy outlook showed that Bank of Japan (BoJ) officials have indicated a willingness to raise rates further, although they have become more cautious due to increased market volatility. Meanwhile, Japan’s Finance Minister Shunichi Suzuki stressed that monetary policy decisions fall under the purview of the Bank of Japan, while they continue to closely monitor market developments, Reuters reported.
Daily Market Wrap: Japanese Yen falls on lower chances of Fed rate cuts
- The Japanese Yen may receive support from safe haven flows amid rising geopolitical tensions in the Middle East. ABC News reported that the Israel Defense Forces (IDF) intercepted around 30 “projectiles” crossing from Lebanon into northern Israel early on Monday. The IDF stated that some projectiles landed in open areas and no injuries were reported.
- A Julius Baer analyst believes that there is no need for the Bank of Japan to significantly increase interest rates beyond current levels. Once market conditions stabilize, the interest rate differential of approximately 500 basis points between the JPY and the USD is expected to become the main factor. The analyst does not foresee the Yen appreciating further.
- Bloomberg reported that JP Morgan Asset Management (JPAM) believes the Bank of Japan is unlikely to raise interest rates in the near term. According to JPAM, the BoJ would only consider further rate hikes if the Federal Reserve cuts rates and the US economy stabilizes. They anticipate that any further tightening by the BoJ is most likely to occur in 2025, provided the global economic environment remains stable.
- On Thursday, Kansas City Fed President Jeffrey Schmid said that easing monetary policy could be “appropriate” if inflation remains low. Schmid noted that the Fed’s current policy is “not that tight” and that while the Fed is close to its 2% inflation target, it has not yet fully achieved it, according to Reuters.
- Initial claims for jobless benefits in the U.S. fell to 233,000 for the week ended August 2, below the market expectation of 240,000. The decline follows an upwardly revised figure of 250,000 for the previous week, which was the highest in a year.
- The Bank of Japan’s Summary of Opinions from the July 30-31 policy meeting showed that several members believe economic activity and prices are progressing as anticipated by the BoJ. Members are aiming for a neutral rate of “at least around 1%” as a medium-term target.
- On Wednesday, BoJ Deputy Governor Shinichi Uchida also noted that the BoJ’s interest rate strategy will be adjusted if market volatility alters economic forecasts, risk assessments or projections. Given the recent market volatility, he stressed the need for careful monitoring of the economic and price impacts of its policies, stating, “We should maintain the current degree of monetary easing for the time being.”
- Minutes from the Bank of Japan’s June meeting showed some members expressed concerns that rising import prices due to the recent fall in the JPY could pose an upside risk to inflation. One member noted that cost-push inflation could intensify underlying inflation if it results in higher inflation expectations and wage increases.
Technical Analysis: USD/JPY rises near 147.00
USD/JPY is trading around 147.00 on Monday. The daily chart analysis shows that the pair is positioned above the descending channel, which suggests a weakening of the bearish trend. Moreover, the 14-day Relative Strength Index (RSI) is at the level of 30. If the RSI moves towards 50, it could signal a possible improvement in the pair’s momentum.
For support levels, the USD/JPY pair could test the upper boundary around the 145.50 level. If it breaks below this level, the pair could face downward pressure, potentially pushing it towards the retracement support at 140.25, and further down towards the lower boundary of the descending channel near 137.00.
On the upside, the USD/JPY pair could test the immediate barrier at the nine-day exponential moving average (EMA) around the 147.75 level. A break above this level could dampen the bearish momentum and allow the pair to approach the “retracement support turned resistance” at 154.50.
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 weakest currency against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.02% | 0.03% | 0.32% | 0.00% | -0.13% | -0.13% | 0.12% | |
| EUR | -0.02% | 0.04% | 0.27% | -0.02% | -0.28% | -0.15% | 0.12% | |
| GBP | -0.03% | -0.04% | 0.51% | -0.05% | -0.32% | -0.20% | 0.09% | |
| JPY | -0.32% | -0.27% | -0.51% | -0.30% | -0.52% | -0.45% | -0.22% | |
| CAD | -0.01% | 0.02% | 0.05% | 0.30% | -0.20% | -0.14% | 0.15% | |
| AUD | 0.13% | 0.28% | 0.32% | 0.52% | 0.20% | 0.12% | 0.40% | |
| NZD | 0.13% | 0.15% | 0.20% | 0.45% | 0.14% | -0.12% | 0.28% | |
| CHF | -0.12% | -0.12% | -0.09% | 0.22% | -0.15% | -0.40% | -0.28% |
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.
