Japanese Yen struggles near one-week low, bears remain cautious amid intervention fears – Crypto News – Crypto News
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USD/JPY extends recovery above 136.60, investors turn risk-averse ahead of Jackson Hole USD/JPY extends recovery above 136.60, investors turn risk-averse ahead of Jackson Hole

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Japanese Yen struggles near one-week low, bears remain cautious amid intervention fears – Crypto News

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  • The Japanese Yen attracts some buyers amid geopolitical risks and intervention fears.
  • Fading hopes for an imminent shift in the BoJ’s policy stance cap any meaningful gains.
  • The Fed’s higher-for-longer narrative to underpin the USD and lend support to USD/JPY.

The Japanese Yen (JPY) struggles to capitalize on its modest Asian session gains on Friday and languishes near a one-week low touched against the US Dollar (USD) the previous day. A recession in Japan seems to have dashed hopes for an imminent shift in the Bank of Japan’s (BoJ) policy stance in the coming months. This, along with a strong bullish sentiment across the global equity markets, acts as a headwind for the safe-haven JPY. That said, the recent verbal intervention by Japanese authorities and geopolitical tensions might hold back traders from placing aggressive bearish bets around the JPY.

Apart from this, subdued US Dollar (USD) price action warrants caution before positioning for any meaningful appreciating move for the USD/JPY pair. the minutes of the late January FOMC meeting revealed that policymakers are in no rush to cut interest rates amid sticky inflation and the still-resilient US economy. This remains supportive of elevated US Treasury bond yields and favours the USD bulls, suggesting that the path of least resistance for the current pair is to the upside. Hence, any meaningful corrective decline could be seen as a buying opportunity and is more likely to remain limited.

Daily Digest Market Movers: Japanese Yen seems vulnerable amid divergent BoJ-Fed policy expectations

  • Attacks on commercial vessels in the Red Sea by Yemen’s Iran-aligned Houthi rebels show no sign of abating despite US and UK strikes, raising the risk of further military action and benefiting the safe-haven Japanese Yen.
  • Japan’s Ministry of Finance and the Bank of Japan recently warned that they’re watching the exchange rate closely and are willing to intervene in the market to stem any further weakness in the domestic currency.
  • Data released last week showed that Japan’s economy unexpectedly entered a technical recession during the fourth quarter, fuelling speculations that the BoJ might delay its plans to exit the ultra-easy policy regime.
  • On the other hand, the FOMC meeting minutes on Wednesday, along with comments by a slew of influential Federal Reserve officials, reiterated the message that the central bank will keep interest rates higher for longer.
  • Fed Vice Chair Philip Jefferson said on Thursday that he was cautiously optimistic about progress on inflation and that he will be looking at the totality of data when weighing interest rate cut options, not a single indicator.
  • Separately, Philadelphia Fed President Patrick Harker noted that the central bank is approaching the point of cutting interest rates, though policymakers remain unsure of when specifically, that might happen.
  • Furthermore, Fed Governor Lisa Cook believes that the current monetary policy stance is restrictive and would like to have greater confidence that inflation is converging to 2% before beginning interest rate cuts.
  • Meanwhile, Fed Governor Christopher Waller expects the FOMC to begin lowering at some point this year, but he will need more evidence to see that inflation is cooling before he is willing to support interest rate cuts.
  • According to the CME FedWatch Tool, the current market pricing indicates about a 30% chance that the Fed will start cutting interest rates in May, much lower than a more than over 80% chance a month ago.
  • Adding to this, fresh signs of strength in the US labor market remain supportive of elevated US Treasury bond yields, which favours the US Dollar bulls and should lend some support to the USD/JPY pair.
  • The US Department of Labor reported that the number of Americans applying for unemployment insurance benefits declined to 201K during the week ending February 17 from the 213K in the previous week.
  • The better-than-expected release of the flash PMI prints showed that the downturn in the Eurozone business activity eased in February, which further boosted investors’ sentiment and should cap gains for the JPY.

Technical Analysis: USD/JPY bullish potential intact, dips are likely to get bought into and remain limited

From a technical perspective, any meaningful pullback is likely to find decent support near the 150.00 psychological mark. This is followed by the weekly low, around the 149.70-149.65 region, which if broken could drag the USD/JPY pair further towards the 149.35-149.30 horizontal support en route to the 149.00 mark. Some follow-through selling below the 148.80-148.70 strong horizontal resistance breakpoint might shift the bias in favour of bearish traders and pave the way for deeper losses.

On the flip side, bulls might still wait for a sustained strength beyond the 150.85-150.90 area, or a multi-month top touched last week, before placing fresh bets. Given that oscillators on the daily chart are holding comfortably in the positive territory and are still away from being in the overbought zone, the USD/JPY pair might then climb to the 151.45 hurdle. The momentum could extend towards the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and retested in November 2023.

Japanese Yen price today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Swiss Franc.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.06% -0.02% 0.00% -0.20% -0.04% -0.07% 0.02%
EUR 0.05%   0.03% 0.05% -0.14% 0.01% -0.02% 0.05%
GBP 0.02% -0.04%   0.02% -0.18% -0.02% -0.05% 0.01%
CAD 0.00% -0.06% -0.03%   -0.20% -0.03% -0.08% -0.01%
AUD 0.20% 0.14% 0.18% 0.20%   0.16% 0.10% 0.18%
JPY 0.03% -0.01% 0.04% 0.04% -0.16%   -0.03% 0.04%
NZD 0.06% 0.02% 0.05% 0.08% -0.13% 0.04%   0.08%
CHF -0.01% -0.07% -0.03% -0.01% -0.22% -0.05% -0.11%  

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.

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