The Japanese Yen gives up some of its recent strong gains against the US Dollar.
Reduced bets for an imminent shift in the BoJ’s policy shift undermine the JPY.
The USD draws support from Friday’s better-than-expected US monthly job data.
The market attention now shifts to the US CPI and the FOMC decision this week.
The Japanese Yen (JPY) extends its depreciating move for the second successive day and lifts the USD/JPY pair to mid-src45.00s heading into the European session on Monday. A report on Friday indicated that Bank of Japan (BoJ) Governor Kazuo Ueda’s comments last week were taken out of context and not meant to signal anything about the timing of a policy change. Adding to this, the weaker GDP report pointed to Japan’s still fragile economy and suggested that market expectations of an imminent rate hike may be overblown. This, in turn, is seen undermining the JPY.
The USD, on the other hand, remains supported by a stronger monthly jobs report released on Friday, which forced traders to bet that it could take the Federal Reserve (Fed) until May 2024 to begin a series of interest-rate cuts. This further contributes to the USD/JPY pair’s ongoing recovery move from the vicinity of a multi-month low touched last Thursday. That said, concerns about a deeper global economic downturn and geopolitical risks, could limit losses for the safe-haven JPY and cap any further move up for the major ahead of this week’s key data/event risks.
The US consumer inflation figures are due for release on Tuesday and will be followed by the outcome of the crucial two-day FOMC monetary policy decision on Thursday. The so-called “dot plot” will provide cues about the Fed’s interest rate projections for the next year, which, in turn, should play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the major. This makes it prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out and positioning for additional gains.
Daily Digest Market Movers: Japanese Yen gives back some of its recent strong gains against the US Dollar
A Reuters report, citing three sources familiar with the matter, said that Bank of Japan Governor Kazuo Ueda’s comments last week were not meant to signal an imminent policy shift.
This, along with data showing that Japan’s economy contracted more sharply than first estimated in the third quarter, by an annualized 2.9%, is seen undermining the Japanese Yen.
The US Bureau of Labor Statistics (BLS) reported on Friday that the economy added src99K new jobs in November as compared to the src50K in the previous month and src80K anticipated.
Additional details of the publication revealed that the Unemployment Rate declined to 3.7% from 3.9% in October, despite a rise in the Labor Force Participation Rate to 62.8% from 62.7%.
Annual wage inflation, as measured by the change in Average Hourly Earnings, matched consensus estimates and held steady at 4% during the reported month.
The upbeat US employment figures forced investors to scale back their expectations for an early interest rate cut by the Federal Reserve, as early as March 2024.
Investors now look forward to the latest US consumer inflation figures on Tuesday, which could influence market expectations about a series of Fed rate cuts next year.
The US central bank is also scheduled to announce its policy decision at the end of a two-day policy meeting on Wednesday and is anticipated to maintain the status quo.
The market focus, meanwhile, will be on the so-called “dot plots” and Fed Chair Jerome Powell’s comments at the post-meeting press conference.
Technical Analysis: USD/JPY recovers further from multi-month low, looks to build on momentum beyond 38.2% Fibo.
From a technical perspective, the USD/JPY pair last week showed some resilience at the very important 200-day Simple Moving Average (SMA). The subsequent move beyond the 23.6% Fibonacci retracement level of the recent decline from the src52.00 neighbourhood, or the YTD peak, favours bullish traders. The momentum, however, paused ahead of the 38.2% Fibo. level during the Asian session on Monday, which if cleared should allow spot prices to reclaim the src46.00 mark. The momentum could get extended further, though is more likely to remain capped near the 50% Fibo. level, around the src46.80 region.
Meanwhile, oscillators on the daily chart are holding deep in the negative territory and support prospects for the emergence of some selling at higher levels. That said, the src45.00 psychological mark might now protect the immediate downside ahead of the src44.55-src44.50 area, or the 50% Fibo. level and the src44.00 round figure. Failure to defend the said support levels could make the USD/JPY pair vulnerable to accelerate the slide further towards retesting sub-src43.00 levels, or the 6src.8% Fibo. level. This is followed by the 200-day SMA, currently around the src42.35 region, the src42.00 mark and the src4src.60 region, or the multi-month low touched last Thursday. Some follow-through selling below the latter will be seen as a fresh trigger for bearish traders and pave the way for a further near-term depreciating move for the USD/JPY pair.
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 Euro.
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF
USD
-0.07%
0.0src%
0.05%
0.32%
0.3src%
0.src6%
-0.09%
EUR
0.07%
0.08%
0.src2%
0.39%
0.38%
0.22%
-0.02%
GBP
0.00%
-0.08%
0.05%
0.3src%
0.3src%
0.src5%
-0.src0%
CAD
-0.04%
-0.src2%
-0.05%
0.27%
0.27%
0.srcsrc%
-0.src4%
AUD
-0.32%
-0.39%
-0.32%
-0.26%
0.00%
-0.src5%
-0.4src%
JPY
-0.30%
-0.38%
-0.38%
-0.26%
-0.0src%
-0.src4%
-0.40%
NZD
-0.src7%
-0.24%
-0.src6%
-0.srcsrc%
0.src5%
0.src5%
-0.26%
CHF
0.07%
-0.0src%
0.07%
0.src2%
0.38%
0.36%
0.23%
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, how does it impact the US Dollar?
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
How often does the Fed hold monetary policy meetings?
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
What is Quantitative Easing (QE) and how does it impact USD?
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
What is Quantitative Tightening (QT) and how does it impact the US Dollar?
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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