Finance news
- The Japanese Yen strengthens against the USD, though it lacks bullish conviction amid BoJ uncertainty.
- The upbeat market mood and elevated US bond yield might contribute to capping the lower-yielding JPY.
- Traders look at Thursday’s US macro data and the Fed speaks ahead of Japan’s National CPI on Friday.
The Japanese Yen (JPY) remains on the front foot against its American counterpart through the Asian session ahead of Bank of Japan (BoJ) Governor Ueda Kazuo’s appearance later this Thursday. Ueda’s insights on the economic outlook, inflation, and the timing for another interest rate hike will play a key role in influencing the JPY. In the meantime, the uncertainty tied to further policy tightening by the BoJ might hold back the JPY bulls from placing aggressive bets.
Meanwhile, US Treasury bond yields remain elevated amid expectations that US President-elect Donald Trump’s proposed policies could reignite inflation and force the Federal Reserve (Fed) to slow its path of rate cuts. This continues to act as a tailwind for the US Dollar (USD), which, along with a positive risk tone, should cap gains for the lower-yielding JPY. Investors might also prefer to wait for the release of Japan’s National Core Consumer Price Index (CPI) on Friday.
Finance news Japanese Yen bulls seem non-committed amid BoJ rate-hike uncertainty and a positive risk tone
- Bank of Japan Governor Kazuo Ueda earlier this week left markets guessing as to how soon and at what pace could the central bank tighten its monetary policy.
- Investors are pricing in an even chance of a 25-basis-point rate hike and an on-hold decision at the final BoJ policy meeting of this year on December 18-19.
- According to mediate reports, the economic package proposed by Japanese Economic Revitalisation Minister Akazawa is expected to be around ¥21.9 trillion.
- Comments from Russian and US officials eased market concerns about the onset of a nuclear war, denting demand for traditional safe-haven currencies.
- US President-elect Donald Trump’s proposed policies could potentially stoke inflation and slow the path of interest rate cuts from the Federal Reserve.
- Furthermore, Fed policymakers’ cautious remarks on further policy easing remain supportive of rising US Treasury bond yields and a bullish US Dollar.
- Lisa Cook, a member of the Federal Reserve Board of Governors, noted on Wednesday that the central bank might get forced into a pause on interest rate cuts if inflation progress slows down.
- Separately, Fed Governor Michelle Bowman said that the progress on inflation appears to have stalled and that the central bank should pursue a cautious approach.
- Boston Fed President Susan Collins said that more rate cuts are needed, but policymakers should proceed carefully to avoid moving too quickly or too slowly.
- Traders now look to BoJ Governor Kazuo Ueda’s appearance for some impetus ahead of speeches from a slew of influential FOMC members later this Thursday.
- Meanwhile, the US economic docket features the release of Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data.
- The focus, however, remains on Japan’s National Core Consumer Price Index (CPI), which will be among the factors that the BoJ will scrutinize at its next meeting.
Finance news USD/JPY needs to break below the 100-period SMA on the 4-hour chart for bears to seize control
From a technical perspective, the USD/JPY pair has been showing some resilience below the 100-period Simple Moving Average (SMA) on the 4-hour chart. Moreover, oscillators on the daily chart are holding comfortably in positive territory, suggesting that any subsequent slide might still be seen as a buying opportunity near the 154.65-154.60 region. This should help limit the downside near the 154.00 mark (200-period SMA). The said support should act as a key pivotal point, which if broken might expose the weekly swing low, around the 153.25 area.
On the flip side, the Asian session peak, around the 155.40 area, now seems to act as an immediate hurdle, above which the USD/JPY pair could make a fresh attempt to reclaim the 156.00 mark. Some follow-through buying could lift spot prices towards retesting the multi-month top, around the 156.75 region touched last Friday.
Finance news 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 embarked in an ultra-loose monetary policy in 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. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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