- The USD/JPY begins the new week with a weaker tone in the middle of a combination of negative factors.
- Betting for an increase in Boj rates and a slight deterioration in the feeling of global risk benefit the JPY.
- A surprising reduction of the US credit rating and moderate expectations of the Fed weigh on the USD.
The USD/JPY torque attracts new sellers on Monday and falls to a minimum of more than a week, around the 144.80 area during the Asian session. In addition, the fundamental background suggests that the path of lower resistance for cash prices remains down and supports the prospects for an extension of the recent fall from a maximum of almost six weeks reached last Monday.
The growing conviction that the Bank of Japan (BOJ) will increase interest rates again in 2025 is considered a key factor that continues to support the Japanese Yen (JPY). Apart from this, a surprising reduction of the Credit Qualification of the US government moderates the appetite of investors for higher risk assets and benefits traditional secure shelter assets, including the JPY. In fact, Moody’s reduced the highest sovereign credit rating in America on a step, to “AA1” on Friday, due to concerns about the growing indebtedness of the nation.
Meanwhile, investors seem convinced that the Federal Reserve (FED) will cut even more rates amid signals of inflation in descent and the probability that the US economy experiences several quarters of slow growth. This keeps the US dollar (USD) depressed at the beginning of a new week and exerts additional pressure on the USD/JPy torque. However, the lack of continuous sales below the psychological brand of 145.00 justifies some caution for bassists and before positioning themselves for deeper losses.
Looking ahead, there are no relevant economic data that is expected to move the market from the US on Monday, leaving USD at the mercy of the Speeches of influential FOMC members. Apart from this, the deepest feeling of risk will boost the JPY demand and will provide some impetus to the USD/JPY torque. However, divergent policy expectations between the BOJ and the FED validate the short -term negative perspective. Therefore, any attempt of recovery could be seen as a sales opportunity and it is likely to remain limited.
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.
