USD/JPY is holding steady above 143.00 despite the decline in the US dollar

VaselineSeptember 25, 2024

0 2 minutes read

USD/JPY is holding steady above 143.00 despite the decline in the US dollar

USD/JPY is steady around 143.20 in the first Asian session on Wednesday.
Investors are raising their bets on a jumbo rate cut from the US Fed in November.
The BoJ governor signals that he is in no rush to raise rates further.

USD/JPY is trading at 143.20 despite a weaker US dollar (USD) during the opening session in Asia on Wednesday. However, rising expectations of a jumbo rate cut by the US Federal Reserve (Fed) in November could continue to weigh on the pair.

Fed Governor Michelle Bowman said on Tuesday that key measures of inflation remain “uncomfortably above” the 2 percent target, warranting caution as the Fed continues to cut interest rates. However, she preferred the Fed to cut by a quarter of a percentage point, more in line with traditional central bank moves.

Fed Governor Adriana Kugler is due to speak later on Wednesday. The release of the US Personal Consumption Expenditure (PCE) price index for August will be in focus on Friday. Any dovish comments from Fed officials and signs of weaker inflation could undermine the USD against the Japanese yen (JPY).

Data released Tuesday by the Conference Board showed that the U.S. consumer confidence index fell to 98.7 in September from a revised 105.6 in August. This figure marked the biggest drop since August 2021.

On the other hand, speculation that the Bank of Japan (BoJ) has been slow to raise interest rates further could drag the JPY lower and limit USD/JPY’s downside. BoJ Governor Kazuo Ueda said on Tuesday that the central bank can afford to spend time watching developments in financial markets and overseas economies while setting monetary policy.

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.

VaselineSeptember 25, 2024

0 2 minutes read

Frequently Asked Questions about the Japanese Yen

Vaseline

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