- The Japanese Yen strengthens against the US Dollar and is supported by a combination of factors.
- Speculation about a hawkish turn in the Bank of Japan’s monetary policy boosts the Yen and weighs on the USD/JPY pair.
- Expectations that the Fed will not raise rates further limit the recent recovery of the Dollar and also put pressure on the pair.
The Japanese Yen (JPY) recovers some of its losses against the US Dollar (USD) recorded in the last two days and looks set to appreciate further amid expectations that the Bank of Japan (BoJ) is getting closer to exit the extremely accommodative monetary policy configuration of a decade. This, along with the emergence of fresh selling around the USD, keeps the USD/JPY pair under pressure near the 149.00 level at the start of the European session on Thursday.
The USD’s recovery move from its lowest level since August 31, inspired by the FOMC minutes, is running out amid growing expectations that the Federal Reserve (Fed) has ended its monetary policy tightening campaign. Additionally, markets are pricing in the possibility that the U.S. central bank will begin cutting rates during the first half of 2024. This, in turn, keeps the 10-year U.S. government bond yield near two-month lows and weakens the dollar.
Daily Market Summary: Japanese Yen Continues to Advance
- The Japanese Yen weakened to 149.75 against the US Dollar on Wednesday, although on Thursday it recovered some of the losses recorded in the last two days.
- Speculation that the Bank of Japan could end its negative rate policy in the early months of 2024 dragged USD/JPY lower on Thursday.
- Minutes from the latest Federal Reserve meeting indicated that the central bank will likely maintain a restrictive stance on interest rates for some time.
- Initial claims for jobless benefits in the United States fell by 24,000 to a seasonally adjusted level of 209,000 in the week ended November 18, the lowest level in more than a month.
- This optimistic data suggests that the US labor market remains resilient despite economic uncertainties and is not cooling as quickly as the Fed might have expected.
- The University of Michigan survey showed the consumer sentiment index marked a fourth consecutive month of declines and stood at 61.3 in November.
- Inflation expectations, however, rose to 4.5% in November, up from 4.2% previously, rising for the second month in a row and reaching their highest reading since April 2023.
- Durable goods orders saw a significant decline in October and fell more than expected by 5.4%, reversing the previous month’s 4.6% rise.
- Market participants have virtually ruled out any further interest rate hikes by the Fed and now see a greater than 50% chance of a rate cut in May 2024.
- Traders are also choosing to lighten their positions as trading activity is likely to remain limited due to the Thanksgiving holiday in the United States.
- Preliminary Eurozone and UK PMIs will be released today, which could impact global risk sentiment and influence the safe-haven JPY.
- The focus will be on Japan’s national CPI, due to be released during the Asian session on Friday, followed by preliminary US PMI data later in the day.
Technical Analysis: USD/JPY shows some resistance below 149.00
From a technical perspective, the USD/JPY pair has fallen below the 23.6% Fibonacci retracement of the last move from the 147.15 area. A drop below the 149.00 level would set the stage for a decline towards the 38.2% Fibonacci level, around the 148.75 area. Next, support will be located at 148.50, that is, at 50% Fibonacci, and 61.8% Fibonacci around the 148.15 area. A convincing break below this last level will set the stage for a slide higher. A convincing break below the latter will suggest that the corrective bounce is over and will expose the monthly low, around the 147.15 region touched on Tuesday, with some intermediate support near the round 148.00 level.
On the other hand, the previous day’s high, around the 149.75 area, appears to act as an immediate hurdle before the confluence of 150.00, which comprises the 200-period SMA on the 4-hour chart and 61.8% Fibonacci. Below is the 100 SMA on the 4-hour chart, currently near the 150.35 area, which if broken decisively will negate any short-term negative bias. The USD/JPY pair could then try to reclaim the 151.00 level before rising further towards challenging the yearly high, just ahead of the 152.00 level.
Dollar Quote Today
Below is the percentage change of the US Dollar (USD) against major currencies today.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.16% | -0.17% | -0.10% | -0.25% | -0.27% | -0.58% | -0.13% | |
| EUR | 0.17% | 0.01% | 0.04% | -0.09% | -0.10% | -0.41% | 0.04% | |
| GBP | 0.15% | -0.01% | 0.04% | -0.11% | -0.10% | -0.44% | 0.03% | |
| CAD | 0.12% | -0.04% | -0.03% | -0.13% | -0.14% | -0.43% | -0.01% | |
| AUD | 0.24% | 0.11% | 0.10% | 0.14% | -0.01% | -0.30% | 0.12% | |
| JPY | 0.28% | 0.12% | 0.12% | 0.18% | 0.01% | -0.30% | 0.15% | |
| NZD | 0.57% | 0.41% | 0.42% | 0.45% | 0.32% | 0.31% | 0.44% | |
| CHF | 0.13% | -0.03% | -0.03% | 0.01% | -0.14% | -0.14% | -0.47% |
The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen in the left column, while the quote currency is chosen in the top row. For example, if you choose the euro in the left column and scroll down the horizontal line to the Japanese yen, the percentage change that appears in the box will represent EUR (base)/JPY (quote).
Frequently Asked Questions about the Japanese Yen
What factors determine the price of the Japanese Yen?
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 Japanese and US bond yields or the risk sentiment among traders, among other factors.
How do decisions by the Bank of Japan affect the Japanese Yen?
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.
How does the spread between Japanese bond yields and US bond yields affect the Japanese Yen?
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.
How does general risk sentiment influence the Japanese 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.
