Japanese yen remains subdued as Fed’s Powell says 50bps cuts are not a new pace

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Japanese yen remains subdued as Fed’s Powell says 50bps cuts are not a new pace

The Japanese yen depreciated as Fed Chairman Powell emphasized that 50 basis point cuts are not the “new pace.”
JPY downside could be narrowed due to bullish sentiment surrounding the Bank of Japan.
Fed policymakers raised their long-term projection for the federal funds rate from 2.8 percent to 2.9 percent.

The Japanese yen (JPY) pared its intraday losses but remains weaker against the US dollar (USD) on Thursday. Despite an aggressive 50 basis point (bps) interest rate cut by the US Federal Reserve (Fed) on Wednesday, the risk-sensitive JPY continued to depreciate.

Traders are now focusing on the Bank of Japan’s (BoJ) policy decision scheduled for Friday, with expectations that rates will remain unchanged while leaving room for potential future rate hikes. In addition, Japan’s National Consumer Price Index (CPI) data will be closely watched as the inflation report could provide new insights into the BoJ’s future interest rate path.

The rise in the USD/JPY pair could be attributed to remarks made by Fed Chairman Jerome Powell. In the post-meeting news conference, Powell said the Fed was in no rush to ease policy and stressed that half-percentage-point cuts were not the “new pace.”

Fed policymakers updated their quarterly economic forecasts, raising the median projection for unemployment to 4.4 percent by the end of 2024, up from the 4.0 percent estimate made in June. They also raised their long-term projection for the federal funds rate from 2.8 percent to 2.9 percent.

Daily Digest Market Movers: Japanese Yen Depreciates as Fed Raises Long-Term Rate Projection

The Federal Open Market Committee (FOMC) cut the federal funds rate to a range of 4.75% to 5.0%, marking the Fed’s first rate cut in four years.
Federal Reserve Chairman Jerome Powell commented on the aggressive 50 basis point interest rate cut, saying, “This decision reflects our increased confidence that with the right adjustments to our policy approach, we can maintain a market of strength of strong labour, we achieve moderate economic growth and bring inflation down to a sustainable level of 2%.”
Japan’s merchandise trade balance posted a larger trade deficit of ¥695.30 billion in August, up from ¥628.70 billion the previous month, but well below market expectations of a ¥1,380.0 billion deficit . Exports rose 5.6% year-on-year, marking the ninth consecutive month of growth, but fell short of the anticipated 10.0%. Imports rose just 2.3 percent, the slowest pace in five months, significantly beating the expected 13.4 percent increase.
JP Morgan CEO Jamie Dimon said Tuesday that if the Federal Reserve cuts interest rates by 25 or 50 basis points, the impact “will not be earth-shattering.” Dimon stressed, “They have to,” but noted that such moves are relatively minor in the grand scheme of things because “there’s a real economy” operating under the Fed’s rate swings, according to Bloomberg.
US retail sales rose 0.1% month-on-month in August after a revised 1.1% rise in July, beating expectations for a 0.2% decline and pointing to resilient consumer spending. Meanwhile, the Retail Sales Control Group rose 0.3%, slightly below the previous month’s 0.4% increase.
Japanese Finance Minister Shunichi Suzuki said on Tuesday that rapid fluctuations in the exchange rate were undesirable. Suzuki stressed that officials will closely monitor how currency movements affect the Japanese economy and people’s livelihoods. The government will continue to assess the impact of a stronger Japanese yen and respond accordingly, according to Reuters.
Commerzbank FX analyst Volkmar Baur predicted the Bank of Japan would remain on the sidelines this week. Baur noted that the Federal Reserve’s actions could have a bigger impact on the USD/JPY pair, suggesting that the JPY could have a strong chance of falling below 140.00 per USD even without a rate hike from the BoJ.
On Friday, Fitch Ratings’ latest report on the Bank of Japan’s policy outlook suggested the BoJ could raise rates to 0.5% by the end of 2024, 0.75% in 2025 and 1.0% by the end of 2026 .

Technical Analysis: USD/JPY advances near 143.00; the next barrier at the 21-day EMA

USD/JPY is trading around 143.00 on Thursday. Analysis of the daily chart indicates that the pair is consolidating in a descending channel, which supports a bearish outlook. However, the 14-day Relative Strength Index (RSI) is rising towards the 50 level and the price has moved above the nine-day exponential moving average (EMA), suggesting a potential upside correction.

On the other hand, USD/JPY may initially face resistance at the 21-day EMA at 143.73 and then at the upper limit of the descending channel around 145.00.

For support, USD/JPY could find immediate support at 139.58, which is the June 2023 low, followed by the lower limit of the descending channel near 137.75.

USD/JPY: Daily chart

Japanese Yen PRICE Today

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

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.02%	0.07%	0.67%	-0.01%	-0.37%	-0.05%	0.31%
EURO	-0.02%		0.04%	0.67%	-0.02%	-0.36%	-0.06%	0.32%
GBP	-0.07%	-0.04%		0.62%	-0.08%	-0.43%	-0.11%	0.24%
JPY	-0.67%	-0.67%	-0.62%		-0.67%	-1.04%	-0.76%	-0.38%
CAD	0.01%	0.02%	0.08%	0.67%		-0.35%	-0.03%	0.31%
AUD	0.37%	0.36%	0.43%	1.04%	0.35%		0.32%	0.67%
NZD	0.05%	0.06%	0.11%	0.76%	0.03%	-0.32%		0.36%
CHF	-0.31%	-0.32%	-0.24%	0.38%	-0.31%	-0.67%	-0.36%

The heatmap shows the percentage changes of major currencies against each other. The base currency is chosen from the left column, while the quoted currency is chosen from the top row. For example, if you choose the Japanese yen in the left column and move along the horizontal line to the US dollar, the percentage change shown in the box will be JPY (base)/USD (quote).

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, 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 intervened directly in currency markets on occasion, generally to depress the yen, although it refrains from doing so because of the political concerns of its main trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the yen to depreciate against its major peers. This process has been exacerbated more recently by a widening policy divergence between the Bank of Japan and other major central banks, which have opted to raise interest rates sharply to fight decades-high levels of inflation.

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

The Japanese yen is often seen as a safe investment. This means that during periods of market stress, investors are more likely to put their money into the Japanese currency due to its supposed reliability and stability. Troubled times are likely to strengthen the value of the yen against other currencies considered riskier to invest in.

Vaseline3 weeks ago

0 5 minutes read