Japanese yen holds ground despite growing doubts about BoJ rate hikes

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Japanese yen holds ground despite growing doubts about BoJ rate hikes

The Japanese yen could struggle as the BoJ appears to be in no rush to raise interest rates.
Japan’s Finance Minister Suzuki expressed his expectation that the BoJ will adopt appropriate monetary policy measures.
Minneapolis Fed President Neel Kashkari believes there should and will be further interest rate cuts in 2024.

The Japanese yen (JPY) remains flat against the US dollar (USD) on Tuesday. However, it faces downward pressure amid growing concerns that the Bank of Japan (BoJ) is in no rush to raise interest rates. Following the BoJ’s policy decision on Friday, Governor Kazuo Ueda noted that while Japan’s economy is experiencing a moderate recovery, signs of underlying weakness persist.

Japan’s Finance Minister Shunichi Suzuki said on Tuesday that he was “monitoring the impact of central banks’ monetary policies.” Suzuki expressed his expectation that the Bank of Japan will implement appropriate monetary policy measures while maintaining close coordination with the government.

The USD/JPY pair could weaken on rising expectations for further interest rate cuts by the US Federal Reserve (Fed) in 2024. According to the CME FedWatch tool, markets are pricing in a 50% probability of a 75 cut of basis points, bringing the Fed Rate to a range of 4.0-4.25% by the end of this year.

Daily Digest Market Movers: Japanese yen remains weak amid dovish BoJ

Jibun Bank Japan’s Composite Purchasing Managers’ Index (PMI) fell to 52.5 in September, down from a final reading of 52.9 in August, which was the highest in 15 months. Despite this decline, it marks the eighth consecutive month of growth in private sector activity this year, driven primarily by the services sector. The services PMI rose to 53.9 in September, up from 53.7 last month.
The S&P Global Composite PMI rose at a slower pace in September, coming in at 54.4 compared to 54.6 in August. The manufacturing PMI unexpectedly fell to 47.0, indicating a contraction, while the services PMI expanded more than expected to 55.4.
Minneapolis Fed President Neel Kashkari said Monday he believes there should and will be further interest rate cuts in 2024. However, Kashkari expects future cuts to be smaller than the one at the September meeting, according to Reuters.
Chicago Fed President Austan Goolsbee noted, “A lot more rate cuts are probably needed over the next year, rates have to come down significantly.” Additionally, Atlanta Fed President Raphael Bostic said on Monday that the US economy is close to normal rates of inflation and unemployment, and the central bank also needs monetary policy to “normalise”, according to Reuters.
On Monday, Japan’s new “top currency diplomat”, Atsushi Mimura, said in an interview with NHK that the yen trades built up in the past were likely to be largely undone. Mimura warned that if such trades increased again, it could lead to increased market volatility. “We are always monitoring the markets to make sure this does not happen,” he added.
Japan’s consumer price index (CPI) rose to an annualized 3.0% in August, up from 2.8% previously, marking the highest level since October 2023. In addition, the national core CPI excluding fresh food , hit a six-month high. of 2.8%, up for the fourth consecutive month and in line with market expectations.
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%.”

Technical Analysis: USD/JPY Holds Above Nine-Day EMA Near 143.50

USD/JPY is trading around 143.70 on Tuesday. Daily chart analysis indicates that the pair is moving in a descending channel, signaling a bearish trend. Additionally, the 14-day Relative Strength Index (RSI) is just below the 50 level, reinforcing the dominant bearish sentiment.

On the downside, USD/JPY may test the nine-day EMA at 143.01. A break below this level could lead the pair to explore the 139.58 region, marking the lowest point since June 2023.

Alternatively, immediate resistance is identified at the upper limit of the descending channel around the 144.30 level. A break above this level could allow USD/JPY to challenge the psychological barrier of 145.00.

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 strongest against the euro.

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.00%	-0.04%	-0.01%	-0.18%	-0.20%	-0.07%	-0.13%
EURO	-0.00%		-0.04%	-0.02%	-0.20%	-0.20%	-0.08%	-0.14%
GBP	0.04%	0.04%		0.04%	-0.14%	-0.15%	-0.05%	-0.08%
JPY	0.01%	0.02%	-0.04%		-0.13%	-0.19%	-0.09%	-0.12%
CAD	0.18%	0.20%	0.14%	0.13%		-0.02%	0.10%	0.06%
AUD	0.20%	0.20%	0.15%	0.19%	0.02%		0.12%	0.05%
NZD	0.07%	0.08%	0.05%	0.09%	-0.10%	-0.12%		-0.03%
CHF	0.13%	0.14%	0.08%	0.12%	-0.06%	-0.05%	0.03%

The heatmap shows the percentage changes of major currencies against each other. The base currency is chosen from the left column, while the quote 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. The 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