Home Forex The Japanese Yen remains bound in a narrow band near YTD lows against the USD

The Japanese Yen remains bound in a narrow band near YTD lows against the USD

by SuperiorInvest


  • The Japanese yen is struggling for a solid intraday direction and will oscillate in a range on Monday.
  • BoJ Uchida's dovish remarks last week and a positive risk tone are limiting JPY gains.
  • Steady bets on a shift in BoJ policy limit losses in muted USD action.
  • Traders will now move to the sidelines as they await the release of key US inflation data this week.

The Japanese yen (JPY) is starting the new week on a subdued note following a public holiday in Japan, oscillating in a narrow range just below the fresh YTD low touched by its US counterpart on Friday. Meanwhile, the bias appears to be tilted in favor of bearish traders in the wake of dovish remarks from Bank of Japan (BoJ) Vice Governor Shinichi Uchida last week and a positive risk tone that tends to undermine the safe haven JPY. This means that there is a growing agreement that Combat will eventually leave the ultra-loose monetary policy setting after the outcome of annual wage negotiations in March help limit the downturn.

The American dollar (USD), on the other hand, remains on the defensive due to uncertainty over how the Federal Reserve System (Fed) will cut rates, further contributing to curb growth USD/JPY few. Traders also appear reluctant, preferring to wait for the release of the latest US consumer inflation data on Tuesday. The data will be looked for indications of the likely timing and pace of rate cuts by the company Fed, which will drive demand for the USD and provide new impetus to the currency pair. Meanwhile, spot prices look likely to extend the range-bound price action as no relevant macro data will be available on Monday.

Daily Digest Market Movers: Japanese yen oscillates in a range amid mixed fundamentals

  • A combination of diverging forces failed to provide any meaningful impetus to the Japanese yen on Monday, amid relatively light trading volumes and a holiday in Japan.
  • Bank of Japan (BoJ) Deputy Governor Shinichi Uchida said on Thursday that aggressive tightening was unlikely even after abandoning negative interest rate policy.
  • Signaling a gradual departure from the current negative interest rate environment, Uchida said the BoJ did not plan to take any drastic action in the near future.
  • This, along with a positive risk tone, is undermining the safe-haven JPY, although strengthening expectations for an imminent shift in BoJ policy is helping to limit deeper losses.
  • He hopes that a sizeable wage increase by Japan's big firms this year will support sustained and stable inflation, allowing the BoJ to move away from its ultra-dovish policy.
  • Federal Reserve officials continued to signal that the U.S. central bank is in no rush to cut borrowing costs amid a still-resilient economy and sticky inflation.
  • Dallas Fed President Lorie Logan said on Friday there was no urgency to cut rates and that she wanted more evidence on inflation to confirm progress was sustainable.
  • Atlanta Fed President Raphael Bostic noted that inflation has been too high for too long and that there is still a way to go and that the US is on track to return to pre-pandemic economic activity.
  • Annual revisions released Friday by the Labor Department showed that U.S. consumer prices rose slightly more than previously reported in October and November.
  • Investors also prefer to wait on the sidelines ahead of the release of the latest US consumer inflation data on Tuesday, which could influence the Fed's future policy decisions.

Technical analysis: USD/JPY bulls on top, may still seek to regain psychological 150.00 mark

Technically, last week's break of 148.80 resistance was seen as a new trigger for bullish traders. In addition, oscillators are the order of the day diagram are holding in positive territory and are far from being in the overbought zone. This in turn suggests that the path of least resistance for the USD/JPY pair remains to the upside. A subsequent move beyond the 149.55-149.60 area or the multi-month high reached on Friday will reaffirm the constructive setup and lift spot prices to the psychological 150.00 level. Some subsequent buying should pave the way for further gains, towards the 150.35 intermediate barrier on the way to the 150.70 region and the 151.00 round.

On the other hand, a resistance break point of 148.80-148.70 could now protect the immediate downside from 148.25-148.20
region and 148.00 marks. Any further decline may continue to attract some buyers and remain capped near the 100-day simple moving average (SMA), which is currently fixed near the 147.65-147.60 zone. The latter should act as a key pivot point that, if decisively broken, could drag the USD/JPY pair towards the 147.00 mark on the way to the 146.35 region and to the monthly swing low around the 145.90 zone.

Today's Japanese Yen Price

The table below shows today's percentage change of the Japanese Yen (JPY) against the major listed currencies. The Japanese yen was the strongest against the New Zealand dollar.

American dollar euros GBP CAD AUD JPY NZD CHF
American dollar 0.01% 0.01% 0.02% -0.01% 0.01% 0.19% 0.02%
euros -0.01% -0.01% -0.01% -0.02% -0.01% 0.17% 0.01%
GBP -0.01% 0.01% 0.02% -0.01% 0.00% 0.18% 0.01%
CAD -0.01% 0.01% 0.00% -0.01% 0.00% 0.18% 0.01%
AUD 0.00% 0.02% 0.01% 0.01% 0.01% 0.19% 0.02%
JPY -0.01% 0.01% 0.04% -0.01% -0.01% 0.18% -0.01%
NZD -0.19% -0.17% -0.18% -0.19% -0.19% -0.18% -0.17%
CHF -0.02% 0.00% -0.01% -0.01% -0.02% -0.01% 0.17%

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

Frequently asked questions about the Japanese yen

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

One of the mandates of the Bank of Japan is to control the currency, so its actions are crucial for the yen. The BoJ has sometimes directly intervened in currency markets, generally to depress the yen, although it often refrains from doing so because of political concerns of its major trading partners. The BoJ's current ultra-loose monetary policy, based on massive stimulus for the economy, has caused the yen to weaken against its major currencies. The process has recently been exacerbated by growing policy differences between the Bank of Japan and other major central banks, which have decided to sharply raise interest rates to combat decades-high levels of inflation.

The BoJ's stance of sticking to an ultra-loose monetary policy has led to a widening policy divergence with other central banks, especially the US Federal Reserve. This supports the widening of the spread 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 investment. This means that during times of market stress, investors are more likely to put their money into the Japanese currency due to its perceived reliability and stability. Turbulent times are likely to strengthen the yen against other currencies that are considered riskier for investment.

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