- The Japanese Yen relies on night recovery from a minimum of more than a month against USD.
- Divergent policy expectations between the BOJ and the Fed provide a good impulse to the JPY of lower performance.
- A weakest USD exerts additional pressure and contributes to the fall of the USD/JPY torque.
The Japanese Yen (JPY) experienced a dramatic intradic turn and recovered around 200 pips from its lowest level since May 13, touched against the US dollar (USD) on Monday. The impulse extends through the Asian session on Tuesday amid the divergent policy expectations of the Bank of Japan (BOJ) and the Federal Reserve (Fed) and drags to the USD/JPy torque below 145.00 in the last hour. Investors seem convinced that the BOJ will increase interest rates in the midst of expanding inflation signals in Japan, while the governor of the Fed, Michelle Bowman, pointed to the possibility of a rate cut as soon as in the July meeting.
Meanwhile, reports suggest that the Minister of Economy of Japan and main tariff negotiator, Ryosei Akazawa, is organizing his seventh visit to the US as soon as June 26. This feeds the hopes of an eventual commercial agreement between the US and Japan before the deadline of July 9 for the high reciprocal tariffs of the US and supports the JPY. In addition, investors remain on alert since there was no immediate confirmation of a high fire agreement by Israel or Iran, which is considered another factor that supports the JPY as a safe refuge. This, together with some additional sales of the USD, contributes to the continuous fall of the USD/JPy torque and supports the perspectives of additional losses.
Japanese yen bullies recover control in relatively Hawkish expectations of the Boj
- The decision of the Bank of Japan last week to reduce the rhythm of decreased bond purchases from fiscal year 2026 forced investors to delay their expectations about the probable moment of the next increase in interest rates. However, the data published last Friday showed that the underlying inflation of Japan reached a maximum of more than two years in May and remained above the 2% target of the central bank for more than three years.
- In addition, the best publication of the expected PMI of Japan on Monday keeps the door open to more rates increases by the BOJ in next month. Meanwhile, reports that the first negotiation of rates at the ministerial level from the Japan-EE.UU Summit. In Canada it could be carried out as soon as June 26 relieve concerns about the economic repercussions of the high US rates and provide an additional impulse to the Japanese yen.
- In contrast, the US dollar extends the decline drop of the previous day from a maximum of more than a week after the US mixed PMISs and the dovish tone comments of the federal reserve officials on Monday. The preliminary manufacturing PMI of S&P global remained stable in 52 in June, while the indicator for the services sector cooled slightly to 53.1 from 53.7, and the compound index fell to 52.8 from 53.0 in May.
- Adding to this, the governor of the Fed, Michelle Bowman, said that the time to cut rates could be quickly approaching, since she has been more concerned about the risks for the labor market and less worried that the rates cause an inflation problem. In addition, the president of the Fed of Chicago, Austan Goolsbee, also said that, so far, the increase in rates has had a more modest impact on the economy in relation to what was expected.
- This adds to the comments of the Governor of the Fed, Christopher Waller, last Friday, that the US Central Bank should consider cutting up at its next policy meeting on July 29-30. The operators are now valuing 58 basic points of feat cuts by the Fed this year, suggesting that two cuts of 25 basic points are safe and a growing possibility of a third reduction. This marks a strong divergence of the Hawkish expectations of the BOJ.
- In the Geopolitical Front, US president Donald Trump announced in Truth Social that Israel and Iran have agreed to a high and total fire. However, Israel has not yet commented officially, while Iran’s Foreign Minister says that if Israel stops his attacks, Iran also ends his attacks. This, together with the uncertainties related to trade, should maintain a brake on optimism and benefit JPY as a safe refuge.
- The operators now expect the testimony of the president of the FED, Jerome Powell, before the Congress, who, together with the speeches of several influential members of the FOMC, will be examined in search of clues about the future trajectory of fence cuts. Apart from this, the US macroeconomic data – the Conference Board Conference Conference Index and the Richmond manufacturing index – would boost the USD and provide some impetus to the USD/JPY torque.
The USD/JPY could accelerate the fall once the support of 145.40 is decisively broken
From a technical perspective, the fall drags to the USD/JPy torne below the single mobile (SMA) average of 100 hours, although it stops before the 50% setback level of the recent strong rising movement. In addition, mixed oscillators in the schedules and daily graphics make a sustained break below the aforementioned support, around the 145.40 area, before positioning themselves for more losses towards the psychological level of 145.00. The latter should act as a short -term base, which, if it breaks decisively, could change bias in favor of bassists and cause some technical sales.
On the positive side, the round level of 146.00, which coincides with the 38.2% fibonacci recoil level, now seems to act as an immediate strong barrier, above which the USD/JPY torque could rise to the area of ​​146.70-146.75 (23.6% fibo level). Some additional purchases, which lead to a subsequent strength beyond the level of 147.00, could raise cash prices to the intermediate obstacle of 147.40-147.45 en route to the round level of 148.00 and the region of 148.65, or the monthly maximum of May.
And in Japanese faqs
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
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.
