- The Japanese yen came under downward pressure following dovish comments by BoJ Deputy Governor Uchida.
- The BoJ’s summary of statements emphasises the medium-term objective of a neutral interest rate of “at least around 1%”.
- Traders expect a larger interest rate cut by the US Federal Reserve in September.
The Japanese yen (JPY) extended losses against the US dollar (USD) on Thursday after erasing intraday gains. This downward trend may be linked to comments by Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, who said on Wednesday: “We will not raise interest rates when markets are unstable,” according to Reuters.
The Bank of Japan’s summary of views from its July 30-31 monetary policy meeting shows that several members believe that economic activity and prices are developing as the BoJ expected. As a medium-term objective, members are aiming for a neutral interest rate of “at least around 1%”.
Summary of BoJ statements: Members expect prices and growth to develop in line with forecasts. Read more.
The safe-haven yen’s downward move may be curbed by increasing risk aversion amid rising tensions in the Middle East. Iran and its allies are preparing for possible retaliatory strikes against Israel following the recent killings of a senior Iranian Hezbollah military commander in Lebanon and a senior Hamas leader in Tehran, according to two US intelligence officials, CNN reported.
The US dollar (USD) is facing challenges as traders expect a deeper rate cut from the US Federal Reserve (Fed) in September. According to the CME FedWatch tool, there is now a 72.0% probability of a 50 basis point (bp) Fed rate cut in September, up from 11.8% the previous week.
Daily Digest Market Movers: Japanese yen comes under pressure after BoJ’s Uchida’s comments
- Japan’s Finance Minister Shunichi Suzuki said on Thursday that he was “closely monitoring the volatile stock market movements but was not at the stage to take any actual action.” Suzuki noted that decisions on monetary policy were the responsibility of the Bank of Japan and stressed that it was closely monitoring market developments, according to Reuters.
- Japan’s current account surplus fell year-on-year to 1,533.5 billion yen ($10.47 billion) in June from 2,849.9 billion yen in the previous month, below market expectations for a surplus of 1,790 billion yen.
- On Wednesday, BoJ Deputy Governor Shinichi Uchida also pointed out that the BoJ’s interest rate strategy will be adjusted if market volatility changes economic forecasts, risk assessments or projections. In light of the recent market volatility, he stressed the need to carefully monitor the impact of its policies on the economy and prices, saying: “We need to maintain the current level of monetary easing for now.”
- Japan’s Cabinet Secretary Yoshimasa Hayashi said on Tuesday: “Benefited by strong Shunto results and minimum wage increases, part-time workers and small businesses are also expected to benefit from wage increases by the fall.”
- Data on cash income for Japanese workers showed a 4.5% year-on-year increase in average earnings in June, beating both the previous 2.0% and the 2.3% forecast. This is the largest increase since January 1997 and underscores Japan’s transition to a rising interest rate environment.
- According to Reuters, Mary Daly, president of the Federal Reserve Bank of San Francisco, expressed growing confidence on Monday that inflation in the U.S. is moving toward the Fed’s 2% target. Daly noted that “risks to the Fed’s mandates are becoming more balanced and there is openness to the possibility of cutting interest rates at upcoming meetings,” according to Reuters.
- The minutes of the Bank of Japan’s June meeting show that some members expressed concern about rising import prices due to the recent decline in the JPY, which could pose an upside risk to inflation. One member noted that cost inflation could exacerbate underlying inflation if it leads to higher inflation expectations and wage increases.
Technical Analysis: USD/JPY consolidates at around 146.50
USD/JPY is trading around 146.50 on Thursday. Daily chart analysis shows that the pair is consolidating inside a descending channel, indicating a bearish bias. Moreover, the 14-day Relative Strength Index (RSI) remains below 30, suggesting a short-term recovery.
In terms of support, the USD/JPY pair could test the lower boundary of the descending channel around a fallback support at the 140.25 level seen in December.
In terms of resistance, the USD/JPY pair is testing the upper boundary of the descending channel aligned with the nine-day exponential moving average (EMA) around the 148.15 level. A breakout above this level could reduce the bearish momentum and allow the pair to test the “fallback support turned resistance” at 154.50.
USD/JPY: Daily chart
Japanese Yen price today
The table below shows the percentage change in the Japanese yen (JPY) against major listed currencies today. The Japanese yen was weakest against the Australian dollar.
| U.S. dollar | EUR | British Pound | EUR | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| U.S. dollar | -0.09% | -0.06% | 0.00% | -0.21% | -0.65% | -0.15% | -0.13% | |
| EUR | 0.09% | 0.05% | 0.06% | -0.14% | -0.57% | -0.06% | -0.04% | |
| British Pound | 0.06% | -0.05% | 0.00% | -0.19% | -0.62% | -0.13% | -0.09% | |
| EUR | 0.00% | -0.06% | 0.00% | -0.22% | -0.63% | -0.17% | -0.13% | |
| CAD | 0.21% | 0.14% | 0.19% | 0.22% | -0.43% | 0.07% | 0.09% | |
| AUD | 0.65% | 0.57% | 0.62% | 0.63% | 0.43% | 0.50% | 0.52% | |
| NZD | 0.15% | 0.06% | 0.13% | 0.17% | -0.07% | -0.50% | 0.02% | |
| CHF | 0.13% | 0.04% | 0.09% | 0.13% | -0.09% | -0.52% | -0.02% |
The heatmap shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column, while the quote currency is selected 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 shown in the box corresponds to JPY (base)/USD (quote).
