Japanese Yen rallies to its highest level since September 14 against the US Dollar

The Japanese Yen strengthens to a two-and-half-month high against the US Dollar on Wednesday.
Dovish Fed expectations drag the US bond yields lower and continue to weigh on the Greenback.
The increasing likelihood of a policy shift by the BoJ underpins the JPY and exerts pressure on USD/JPY.

The Japanese Yen (JPY) continues to benefit from the prevalent US Dollar (USD) selling bias, with the USD/JPY pair dropping below the 147.00 mark for the first time since September 14 during the Asian session on Wednesday. The underlying inflation in the United States (US) showed signs of slowing in October and reinforced the market view that the Federal Reserve (Fed) was probably done raising interest rates. Adding to this, dovish remarks from some Fed officials on Tuesday boosted rate cut bets and triggered a fresh leg down in the US Treasury bond yields, dragging the USD to a 3-1/2-month low.

The JPY, on the other hand, is underpinned by strengthening expectations that the end of the Bank of Japan’s (BoJ) negative interest rate policy is approaching. The bets were lifted by data last week, which showed that Japan’s key inflation measure accelerated for the first time in four months and stayed above the BoJ’s 2% target for the 19th straight month. This is seen as another factor contributing to the USD/JPY pair’s downfall for the fourth successive day. That said, a positive risk tone, which tends to dent demand for safe-haven assets, including the JPY, could lend some support and help limit losses.

Daily Digest Market Movers: Japanese Yen remains supported by weaker USD and hawkish BoJ expectations

Federal Reserve Governor Michelle Bowman said on Tuesday that she remains willing to support raising interest rates should the incoming data indicate that progress on inflation has stalled.
New York Fed President John Williams said that longer-term inflation expectations have been encouragingly steady, but did not make any forward-looking comments about monetary policy.
Fed Governor Christopher Waller said that there are good economic arguments that if inflation continues to decline for several more months, it is possible to lower the policy rate.
Waller added that he was increasingly confident that policy is currently well positioned to slow the economy and get inflation back to the central bank’s 2% target.
The dovish remarks reaffirm the market view that the Fed is done with its policy-tightening campaign and may begin cutting interest rates in the middle of 2024.
On the economic data front, the Conference Board’s US Consumer Confidence Index rose to 102 in November from the previous month’s downwardly revised reading of 99.1.
Consumers’ 12-month inflation expectations fell to 5.7% from 5.9% in October, in contrast to the University of Michigan’s survey last week that long-term inflation expectations rose in November to levels last seen in 2011.
The Bank of Japan, meanwhile, will almost certainly end its negative interest rate policy by early next year in the wake of persistently high inflationary pressures.

Technical Analysis: USD/JPY seems vulnerable to slide further, 100-day SMA support breakdown in play

From a technical perspective, a break below the 100-day Simple Moving Average (SMA) pivotal support near the 147.00 mark could be seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have been gaining negative traction and are still far from being in the oversold territory. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the downside and supports prospects for deeper losses. Hence, a subsequent fall towards the 146.50-146.40 intermediate support, en route to the 146.00 round figure, looks like a distinct possibility.

On the flip side, any recovery attempt now seems to confront stiff resistance and remain capped near the 147.30-147.35 barrier. That said, a sustained strength beyond might trigger a short-covering rally and allow the USD/JPY pair to reclaim the 148.00 round figure. The momentum, however, runs the risk of fizzling out rather quickly near the 148.30 strong horizontal support breakpoint, now turned resistance.

Japanese Yen price today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.

 
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF

USD
 
-0.01%
-0.07%
-0.14%
0.02%
-0.08%
-0.75%
-0.07%

EUR
0.02%
 
-0.03%
-0.13%
0.03%
-0.06%
-0.75%
-0.05%

GBP
0.05%
0.03%
 
-0.09%
0.05%
-0.04%
-0.74%
-0.01%

CAD
0.14%
0.13%
0.09%
 
0.16%
0.06%
-0.60%
0.06%

AUD
-0.01%
-0.04%
-0.07%
-0.17%
 
-0.10%
-0.77%
-0.07%

JPY
0.07%
0.07%
0.01%
-0.09%
0.11%
 
-0.66%
0.02%

NZD
0.78%
0.73%
0.70%
0.61%
0.78%
0.67%
 
0.68%

CHF
0.06%
0.05%
0.02%
-0.07%
0.09%
-0.02%
-0.69%
 

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Japanese Yen FAQs

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.

The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.

The Japanese Yen is often seen as 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. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

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