Japanese Yen bulls seem non-committed despite bets for an imminent shift in BoJ’s stance.

  • The Japanese Yen garners fresh buyers after a dip to the weekly low.
  • Reports hinting at a possible March rate hike by the BoJ offer some support to the JPY.
  • The USD shows weakness after a rise driven by warmer US CPI data, which does little to lift the USD/JPY.
  • During the Asian trading session on Wednesday, the Japanese yen (JPY) strengthened modestly against the US dollar, reversing some of the losses seen the day before.
  • News of Japan’s spring wage negotiations revealing agreement by most firms to wage rise demands from trade unions provides additional support to the JPY.
  • Additionally, reports suggest that the Bank of Japan (BoJ) might consider a rate hike in March to contribute to boosting the JPY.
  • However, the USD fails to support the USD/JPY pair much as it experiences a slight downtick.

Despite initial optimism about a potential rate hike by the BoJ, comments from BoJ Governor Kazuo Ueda expressing doubt about Japan’s economic strength have somewhat cooled expectations. Furthermore, the prevailing risk-on sentiment in the market holds back aggressive bullish bets on the safe-haven JPY. Investors appear cautious, waiting on the sidelines ahead of upcoming central bank events, including the BoJ decision next Tuesday and the FOMC policy meeting outcome the following Wednesday. This cautious approach suggests uncertainty surrounding further movements in the USD/JPY pair.

In other developments, expectations of significant pay increases by Japan’s largest companies and the potential for the BoJ to end its hostile interest rate policy soon offer additional support to the Japanese Yen. However, Governor Ueda’s remarks indicate that the central bank may not be prepared for policy, tempering some optimism immediately.

Data from the US reveals a rise in the Consumer Price Index (CPI) in February, which boosts US Treasury bond yields, potentially aiding the US Dollar. However, technical analysis of the USD/JPY pair suggests continued downward pressure, with crucial support levels around 147.00 and 146.80, followed by the 200-day Simple Moving Average (SMA) near 146.25. Further downside momentum could be seen in the pair testing the 50% Fibonacci retracement level at around 145.55-145.50.

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 Swiss Franc.

 USDEURGBPCADAUDJPYNZDCHF
USD 0.01%0.00%0.01%0.03%-0.22%0.02%-0.01%
EUR-0.01% -0.01%0.00%0.03%-0.23%0.00%-0.02%
GBP0.00%0.01% 0.01%0.04%-0.22%0.01%-0.01%
CAD-0.01%0.00%-0.01% 0.01%-0.23%0.00%-0.02%
AUD-0.03%-0.03%-0.04%-0.01% -0.25%-0.04%-0.07%
JPY0.22%0.25%0.23%0.22%0.29% 0.22%0.21%
NZD-0.01%-0.01%-0.01%0.00%0.02%-0.23% -0.02%
CHF0.01%0.02%0.00%0.02%0.04%-0.21%0.02% 

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).

Fed FAQs

What does the Federal Reserve do, and how does it affect the US dollar?

The Federal Reserve (Fed) shapes monetary policy in the United States (US). The Fed has two mandates: price stability and full employment. Its primary weapon for achieving these objectives is to alter interest rates.

When prices rise too rapidly, and inflation exceeds the Fed’s 2% objective, interest rates rise, boosting borrowing costs throughout the economy. Consequently, the US Dollar (USD) strengthens, making the country more appealing to overseas investors seeking to lodge their funds. When inflation falls below 2%, or the unemployment rate is too high, the Fed may decrease interest rates to promote borrowing, weighing on the dollar.

How often does the Fed conduct monetary policy meetings?

The Federal Reserve (Fed) has eight policy meetings yearly, during which the Federal Open Market Committee (FOMC) evaluates economic circumstances and makes monetary policy decisions. The FOMC is attended by twelve Fed officials, including seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the other eleven regional Reserve Bank presidents, who serve one-year terms on a rotational basis.

What is Quantitative Easing (QE), and how does it affect the USD?

In severe cases, the Federal Reserve may use a Quantitative Easing (QE) program. QE is the mechanism by which the Fed significantly boosts the flow of credit in a troubled financial system. It is an unconventional policy instrument used during crises or when inflation is exceedingly low. It was the Fed’s preferred weapon during the Great Financial Crisis 2008. The Fed prints additional dollars and uses them to purchase high-quality bonds from financial companies. QE often weakens the US dollar.

What is Quantitative Tightening (QT), and how does it affect the US dollar?

Quantitative tightening (QT) is the opposite of quantitative easing (QE), in which the Federal Reserve ceases purchasing bonds from financial institutions and does not reinvest the principal from expiring bonds to acquire new bonds. It typically has a beneficial impact on the value of the US dollar.

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