The Japanese Yen (JPY) continues its intraday rebound decline from its lowest level in a week and a half, touching against the weaker US Dollar (USD) this Wednesday, and renewing its lowest daily level during the first half of the European session. The initial market reaction to reports that the Bank of Japan is ramping up its rate hike messaging turned out to be short-lived, as the likelihood of further policy tightening in December or January remains well balanced. Moreover, concerns about Japan’s faltering fiscal position on the back of Prime Minister Sanae Takaishi’s pro-stimulus stance, coupled with the prevailing risk environment, turned out to be major factors undermining the safe-haven Japanese yen.
Meanwhile, data released earlier today confirmed the Bank of Japan’s view that a tight labor market will continue to push up wages and inflation in the services sector. This reaffirms expectations of an imminent rate hike from the Bank of Japan, representing a sharp contrast to the growing acceptance that the US Federal Reserve will cut borrowing costs again in December. The latter keeps the dollar down near a one-week low and may contribute to capping the USD/JPY pair amid speculation that authorities may intervene to stem any further weakness in the Japanese yen. Traders are now looking to more late US economic data for fresh momentum later during the North American session.
The Japanese yen is drifting lower as financial concerns and a positive risk tone offset the Bank of Japan’s bets on raising interest rates
- Reuters reported this Wednesday that the Bank of Japan, over the past week, has deliberately changed its messaging to highlight the inflationary risks to the persistently weak Japanese yen, suggesting that a rate hike in December remains a live option. The change followed a key meeting between Prime Minister Sanae Takaishi and Bank of Japan Governor Kazuo Ueda last week, which appeared to remove immediate political objections to rate hikes from the new administration.
- The Japanese Cabinet approved a 21.3 trillion yen economic stimulus plan last Friday, marking the first significant policy initiative under Prime Minister Sanae Takaishi. This also represents the biggest stimulus since the coronavirus pandemic, which has raised concerns about the supply of new government debt and was a major factor behind the recent steepening of Japan’s yield curve. This, combined with the risk environment, is triggering some intraday selling around the Japanese yen.
- Meanwhile, data from the Bank of Japan showed that the services producer price index, which tracks the prices companies charge each other for services, rose 2.7% in October from a year earlier. This represented a marked slowdown from the revised 3.1% increase recorded in the previous month, although it indicated that Japan was on the cusp of achieving its 2% inflation target permanently. This supports further tightening of the Bank of Japan policy and may provide some support to the Japanese yen.
- On the other hand, the US dollar fell to its lowest level in a week in the wake of unimpressive US macro data released on Tuesday, which confirmed market expectations of another interest rate cut by the US Federal Reserve in December. Additionally, Federal Reserve Governor Stephen Meiran echoed the dovish view and said in a television interview on Tuesday that the deteriorating labor market and economy call for deep interest rate cuts to make monetary policy neutral.
- The possibility of lower US interest rates enhances investors’ appetite for riskier assets amid hopes of reaching a peace agreement between Russia and Ukraine. President Volodymyr Zelensky said on Tuesday that Ukraine is ready to advance a US-backed framework to end the war with Russia. This could limit the safe-haven yen, as traders look to the delayed release of US durable goods orders, along with US weekly initial jobless claims, for fresh momentum around USD/JPY.
USD/JPY could extend the intraday recovery move and aim to reclaim 157.00
The USD/JPY pair now appears to have found acceptance below the 100 hourly simple moving average (SMA) and the 38.2% Fibonacci retracement level of the recent upward move from the monthly low. Moreover, negative oscillators on the hourly chart support the possibility of additional losses. However, technical indicators in the daily chart are holding in positive territory, indicating that any further decline is likely to find good support near the 155.30 area, or the 50% retracement level. This is followed by the psychological level of 155.00, which if broken decisively, will be seen as a new catalyst for bearish traders and paves the way for deeper losses.
On the flip side, momentum back above the Asian session high, around the 156.35 region, may have already paved the way for additional gains and would allow USD/JPY to reclaim the full 157.00 figure. Some subsequent buying may pave the way for additional gains towards the 157.45-157.50 intermediate hurdle on the way to the 158.00 area, or the highest level since mid-January, which was touched last week.
Japanese yen price today
The table below shows how much the Japanese Yen (JPY) has changed against the major currencies listed today. The Japanese yen was the strongest against the US dollar.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | -0.12% | -0.13% | 0.19% | -0.21% | -0.58% | -1.06% | -0.20% | |
| euro | 0.12% | -0.01% | 0.31% | -0.11% | -0.46% | -0.94% | -0.09% | |
| GBP | 0.13% | 0.00% | 0.31% | -0.11% | -0.44% | -0.92% | -0.08% | |
| JPY | -0.19% | -0.31% | -0.31% | -0.42% | -0.76% | -1.24% | -0.39% | |
| Canadian | 0.21% | 0.11% | 0.11% | 0.42% | -0.35% | -0.84% | 0.03% | |
| Australian dollar | 0.58% | 0.46% | 0.44% | 0.76% | 0.35% | -0.49% | 0.37% | |
| New Zealand dollar | 1.06% | 0.94% | 0.92% | 1.24% | 0.84% | 0.49% | 0.87% | |
| Swiss franc | 0.20% | 0.09% | 0.08% | 0.39% | -0.03% | -0.37% | -0.87% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent the Japanese Yen (base)/US Dollar (quote).
