Japanese Yen ticks higher against USD, bulls seem non-committed ahead of FOMC meeting minutes

The Japanese Yen continues with its struggle to gain any meaningful traction on Wednesday.
Intervention fears underpin the JPY, though the BoJ monetary policy uncertainty caps gains.
Traders look to the FOMC minutes for cues about the Fed’s rate-cut path and a fresh impetus.

The Japanese Yen (JPY) extends its sideways consolidative price move on Wednesday and remains confined in a one-week-old range against its American counterpart through the Asian session. Geopolitical risks stemming from conflicts in the Middle East and the prolonged Russia-Ukraine war continue to weigh on investors’ sentiment. This, along with the recent verbal intervention by Japanese authorities, turns out to be a key factors underpinning the safe-haven JPY. 

The US Dollar (USD), on the other hand, languished near its lowest level in almost three weeks touched on Tuesday in the wake of expectations for an imminent shift in the Federal Reserve’s (Fed) policy stance. This further contributes to capping the upside for the USD/JPY pair. Traders, however, seem reluctant to place aggressive directional bets and now look to the FOMC meeting minutes, due later during the US session, for cues about the Fed’s rate-cut path. 

Meanwhile, a recession in Japan fuelled uncertainty about the likely timing of when the Bank of Japan (BoJ) might pivot away from its ultra-easy monetary policy and exit the negative interest rates. This might also hold back traders from placing bullish bets around the JPY and help limit losses for the USD/JPY pair. Hence, it will be prudent to wait for strong follow-through selling before positioning for an extension of the pullback from a three-month peak touched last week. 

Daily Digest Market Movers: Japanese Yen struggles to attract buyers amid BoJ policy uncertainty

Fears that Japanese authorities will intervene in the markets to stem any further weakness in the domestic currency and a softer risk tone lend some support to the safe-haven Japanese Yen.
Japan’s Finance Minister Shunichi Suzuki reiterated on Tuesday that the government is watching FX moves with a high sense of urgency and that the exchange rate was set by a number of factors.
Adding to this, Japan’s Finance Ministry official Atsushi Mimura said that the government can sell assets such as savings and foreign bonds in FX reserves when it is necessary to intervene.
Mimura added that Japan is always communicating and coordinating with other countries in case of FX intervention and is mindful of maintaining safety and securing liquidity in FX reserves management.
Data released this Wednesday showed that Japanese exports grew more than expected in January, though a bigger-than-estimated fall in imports pointed to sluggish domestic demand and a weak economy.
Exports grew 11.9% year-on-year in January, or the highest since November 2022, as compared to a 9.5% fall anticipated, while imports shrank 9.6%, resulting in a lower-than-forecast deficit of ¥1.758 trillion.
According to the Reuters Tankan poll, Japanese manufacturers’ business confidence fell in February, from the previous month’s reading of 6 to -1, marking the first negative reading since last April.
This comes on top of a technical recession in Japan, which could derail the Bank of Japan’s plan to exit its ultra-easy policy this year and is holding back the JPY bulls from placing aggressive bets.
The US Dollar struggles near its lowest level in over two weeks amid bets that the Federal Reserve will start cutting interest rates in the coming months and caps the upside for the USD/JPY pair.
Traders now look to the release of the FOMC meeting minutes for cues about the Fed’s rate-cut path, which will drive the USD demand and provide some meaningful impetus to the currency pair.

Technical Analysis: USD/JPY needs to move beyond multi-month top for bulls to seize back control

From a technical perspective, the recent range-bound price action warrants some caution before positioning for a firm near-term direction. That said, the recent breakout through the 148.70-148.80 horizontal barrier favours bullish traders. Moreover, oscillators on the daily chart are holding in the positive territory and are still away from the overbought zone, validating the constructive outlook for the USD/JPY pair. It, however, will still be prudent to wait for some follow-through buying beyond the mid-150.00s and the 150.85-150.90 region, or a multi-month top set last week, before positioning for any further gains. Spot prices might then climb to the 151.45 intermediate hurdle en route to the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and retested in November 2023.

On the flip side, weakness below the mid-149.00s could attract some buyers near the 149.25-149.20 area. This is followed by the 149.00 round figure and the 148.80-148.70 resistance-turned-support, which should act as a key pivotal point. A convincing break below the latter will suggest that the USD/JPY pair has formed a near-term top and set the stage for some meaningful corrective decline. The subsequent downfall has the potential to drag spot prices to the 148.35-148.30 region en route to the 148.00 mark and the 100-day Simple Moving Average (SMA) support near the 147.70 zone.

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 Euro.

 
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF

USD
 
0.00%
-0.01%
-0.01%
-0.04%
0.06%
-0.12%
-0.03%

EUR
0.01%
 
0.00%
0.00%
-0.03%
0.06%
-0.11%
-0.03%

GBP
0.00%
0.00%
 
0.01%
-0.03%
0.07%
-0.11%
-0.02%

CAD
0.01%
0.00%
-0.01%
 
-0.04%
0.05%
-0.12%
-0.02%

AUD
0.05%
0.02%
0.03%
0.03%
 
0.09%
-0.11%
0.00%

JPY
-0.06%
-0.05%
-0.06%
-0.07%
-0.09%
 
-0.18%
-0.07%

NZD
0.12%
0.11%
0.11%
0.12%
0.07%
0.19%
 
0.09%

CHF
0.03%
0.03%
0.03%
0.03%
0.01%
0.09%
-0.08%
 

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).

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

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