- The Japanese Yen fails to builds on its modest intraday uptick against the USD on Wednesday.
- Geopolitical risks and China’s economic woes could benefit the JPY amid the BoJ’s hawkish tilt.
- Traders might further prefer to wait on the sidelines ahead of the crucial FOMC policy decision.
The Japanese Yen (JPY) attracts fresh sellers following an Asian session uptick against its American counterpart, though lacks follow-through and remains confined in a familiar range held over the past week or so. Japanese Retail Sales and Industrial Production figures for December missed market expectations, which, in turn, seem to undermine the domestic currency. Apart from this, a modest US Dollar (USD) uptick, supported by diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed) in 2024, assists the USD/JPY pair to attract some buyers near the 147.20-147.15 region.
That said, hawkish signals from the Bank of Japan (BoJ) Summary of Opinions, along with persistent worries about geopolitical risks stemming from conflicts in the Middle East and China’s economic woes, should help limit losses for the JPY. Traders also seem reluctant to place aggressive directional bets and prefer to wait for the outcome of the highly-anticipated two-day FOMC meeting, scheduled to be announced later today. Investors will look for cues about the timing of the first interst rate cut by the Federal Reserve (Fed), which will drive the USD and provide a fresh impetus to the USD/JPY pair.
Heading into the key central bank event risk, traders on Wednesday will confront the release of the US ADP report on private-sector employment and Chicago PMI for short-term opportunities during the early North American session. In the meantime,
declining US Treasury bond yields could act as a headwind for the buck, while the recent narrowing of the US-Japan rate differential lend support to the JPY. This, in turn, warrants some caution before positioning for any further intraday appreciating move for the USD/JPY pair.
Daily Digest Market Movers: Japanese Yen remains confined in a familiar range amid mixed fundamental cues
- The Japanese Yen loses traction after softer Japanese Retail Sales and Industrial Production figures for December, though the Bank of Japan’s hawkish tilt should help limit losses.
- Government data showed that Japanese Retail Sales grew by 2.1% in December, marking the 22nd straight month of increase, though fell short of consensus estimates for a 5.1% rise.
- Japan’s factory output rebounded in December and increased by 1.8% from November, representing the biggest gain since June, though it fell short of expectations for a 2.4% growth.
- Japanese government officials said that the January production forecast is expected to decline due to a partial auto plant suspension and that the Noto earthquake had a limited impact on output planning.
- The Bank of Japan’s Summary of Opinions report from the January 2024 monetary policy meeting suggested that the central bank must patiently maintain monetary easing under YCC.
- BoJ board members continued to discuss prospects for ending the negative rate policy at the January meeting, with some indicating conditions that would allow that move are increasing.
- The risk of a further escalation of military action in the Middle East benefits the safe-haven Japanese Yen and should keep a lid on any meaningful appreciating move for the USD/JPY pair.
- The US Dollar gains some positive traction as invstors continue scaling back their expectations for an early rate cut by the Federal Reserve in the wake of a still resilient US economy.
- The Job Openings and Labor Turnover Survey (JOLTS) report published by the Bureau of Labor Statistics on Tuesday showed that US job openings unexpectedly increased in December.
- The number of job openings on the last business day of December stood at 9.02 million, suggesting that the labor market is too strong for the Fed to start cutting interest rates in the first quarter.
- The markets have lowered the odds of a rate cut in March to well below 50% as investors now look to the highly-anticipated FOMC policy decision cues about the timing of first rate cut.
- Wednesday’s release of the US ADP report on private-sector employment and Chicago PMI might provide some impetus, though the immediate market reaction is likely to be short-lived.
Technical Analysis: USD/JPY needs to breakout through a short-term range before the next leg of a directional move
From a technical perspective, the USD/JPY pair has been oscillating in a familiar range around the 100-day Simple Moving Average (SMA) over the past two weeks or so. This points to indecision among traders over the next leg of a directional move and warrants some caution. In the meantime, the 147.00 mark could protect the immediate downside and any subsequent slide is likely to find decent support near last week’s swing low, around the 146.65 region. Some follow-through selling, however, will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.
On the flip side, the 147.65 area could act as an immediate hurdle ahead of the 148.00 round figure and the 148.30-148.35 zone. The next relevant hurdle is pegged near the monthly peak, around the 148.80 region. Given that oscillators on the daily chart are holding comfortably in the positive territory, a sustained strength beyond the latter will be seen as a fresh trigger for bullish traders. The USD/JPY pair might then surpass the 149.00 mark and climb to the 149.30-149.35 intermediate hurdle before aiming towards reclaiming the 150.00 psychological 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 weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.08% | 0.06% | 0.07% | 0.29% | 0.12% | 0.10% | 0.04% | |
| EUR | -0.08% | -0.03% | -0.02% | 0.24% | 0.03% | 0.03% | -0.03% | |
| GBP | -0.06% | 0.04% | 0.01% | 0.25% | 0.06% | 0.05% | 0.00% | |
| CAD | -0.07% | 0.02% | -0.03% | 0.22% | 0.06% | 0.03% | -0.02% | |
| AUD | -0.31% | -0.23% | -0.25% | -0.24% | -0.19% | -0.21% | -0.27% | |
| JPY | -0.11% | -0.03% | -0.07% | -0.06% | 0.22% | -0.03% | -0.07% | |
| NZD | -0.12% | 0.00% | -0.04% | -0.05% | 0.20% | 0.00% | -0.06% | |
| CHF | -0.05% | 0.02% | -0.01% | 0.01% | 0.23% | 0.06% | 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).
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
