- USD/JPY rises near 145.00 as US Dollar recovers strongly.
- US consumer confidence eases fears of hard landing.
- Investors are looking ahead to Tokyo CPI and US core PCE inflation for July.
The USD/JPY pair is up near 145.00 in the North American session on Wednesday. The asset is gaining strength as the US Dollar (USD) makes a strong recovery move after registering a fresh yearly low. The USD is bouncing back as upbeat US Consumer Confidence data for August eased fears of a hard landing.
Market experts began anticipating a hard landing for the US economy after the July Non-Farm Payrolls (NFP) report showed a slowdown in labor demand and a significant rise in the unemployment rate. Hard landing is a scenario where the economy enters a recession in an attempt to bring inflation down to the bank’s target.
The U.S. Conference Board on Tuesday showed that consumer confidence rose to 103.30 in August, beating expectations of 100.7. The sentiment gauge shows individuals’ confidence in the economic outlook.
Meanwhile, market sentiment appears to be risk-off as investors turn cautious ahead of the US core personal consumption expenditure (PCE) price index data for July, due on Friday. The S&P 500 has posted nominal losses in the North American session. The Dollar Index (DXY), which tracks the value of the greenback against six major currencies, rebounded strongly above 101.00 from a fresh yearly low of 100.50.
Core inflation data is expected to influence market speculation on the path of interest rate cuts by the Federal Reserve (Fed). Financial markets currently expect the Fed to start cutting interest rates as early as the September meeting. Traders are divided on the likely size of the rate cut.
On the Japanese Yen (JPY) front, investors are awaiting Tokyo Consumer Price Index (CPI) data for August, due out on Friday. The data is expected to show that Tokyo CPI excluding fresh food rose steadily by 2.2% in August. The inflation data will influence market speculation on the Bank of Japan (BoJ) interest rate hike path.
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 combat 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.
