- The Japanese Yen continues to draw support from hawkish BoJ expectations.
- Fed rate cut bets drag the USD to a multi-month low and weigh on USD/JPY.
- Investors now look to the US Consumer Confidence Index and Fedspeaks.
The Japanese Yen (JPY) extends its appreciating move against the US Dollar (USD) for the third successive day on Tuesday in the wake of the divergent Bank of Japan (BoJ) and the Federal Reserve (Fed) policy expectations. The incoming inflation data from Japan suggests that the economy is making progress towards achieving sustained rises in inflation, fueling speculations that the BoJ will pivot away from its ultra-dovish stance in 2024.
In contrast, investors seem convinced that the Federal Reserve (Fed) is done raising interest rates and may start easing its policy during the first half of 2024. This, in turn, drags the USD Index (DXY), which tracks the Greenback against a basket of currencies, to a nearly three-month low. Apart from this, concerns about a global economic downturn benefit the safe-haven JPY and exert some downward pressure on the USD/JPY pair.
That said, a generally positive tone around the equity markets helps spot prices to hold above the 148.00 mark heading into the European session. Traders now look forward to the release of the Conference Board’s Consumer Confidence Index from the United States (US). This, along with speeches by influential FOMC members, will drive the USD demand and provide some impetus to the USD/JPY pair later during the North American session.
Daily Digest Market Movers: Japanese Yen strengthens further against the US Dollar
- Government data showed on Friday that the nationwide headline and core CPI remained above the Bank of Japan’s 2% target for the 19th consecutive month in October.
- Furthermore, a surge in Japan’s wholesale services inflation, driven by a tight job market, fuels speculations that the BoJ will end its negative interest rate policy in 2024.
- The services Producer Price Index (PPI) released on Monday accelerated to 2.3% in October from a year earlier from a revised 2.0% rise in the previous month.
- Japan’s big employers are set to follow this year’s bumper pay hikes in 2024, giving the Japanese central bank additional room to finally roll back massive monetary stimulus.
- The US Dollar drops to a fresh multi-month low amid growing acceptance that the Federal Reserve is done raising rates and may begin easing policy as early as March 2024.
- The USD/JPY pair remains heavily offered for the third successive day on Tuesday, though a positive risk tone is holding back bearish traders from placing fresh bets.
- The BoJ’s preferred inflation gauge, which has been steadily rising from a 2023 low of 2.7% in February, decelerates to the 3% YoY rate in October from the 3.4% previous.
- Amid speeches by a slew of influential FOMC members, the Conference Board’s US Consumer Confidence Index might also contribute to producing short-term trading opportunities later during the North American session.
Technical Analysis: USD/JPY manages to defend 148.00, not out of the woods yet
From a technical perspective, a sustained break and acceptance below the 148.00 round figure will expose the 100-day Simple Moving Average (SMA), currently near the 147.90-147.85 zone, which if broken decisively will be seen as a fresh trigger for bearish traders and pave the way for deeper losses towards the monthly low, around the 147.15 area.. The USD/JPY pair might then accelerate the fall towards the 146.00 mark en route to the next relevant support near the 145.50 zone.
On the flip side, immediate resistance is pegged near the 148.80 region ahead of the 149.00 mark and the weekly peak, around the 149.65 region touched on Monday. A sustained strength beyond could lift the USD/JPY pair beyond the 150.00 psychological mark, towards the 150.35 resistance zone. Some follow-through buying will negate any near-term negative bias and allow bulls to reclaim the 151.00 round-figure mark.
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 US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.00% | 0.00% | -0.03% | -0.14% | -0.04% | -0.03% | |
| EUR | -0.02% | 0.00% | -0.02% | -0.05% | -0.14% | -0.06% | -0.04% | |
| GBP | 0.00% | 0.01% | 0.00% | -0.03% | -0.13% | -0.03% | -0.01% | |
| CAD | -0.01% | -0.01% | -0.02% | -0.05% | -0.14% | -0.05% | -0.03% | |
| AUD | 0.02% | 0.01% | 0.02% | 0.02% | -0.10% | -0.02% | 0.02% | |
| JPY | 0.15% | 0.12% | 0.13% | 0.14% | 0.08% | 0.06% | 0.13% | |
| NZD | 0.05% | 0.06% | 0.04% | 0.03% | 0.01% | -0.10% | 0.04% | |
| CHF | 0.03% | 0.03% | 0.02% | 0.02% | -0.01% | -0.13% | -0.04% |
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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