- USD/JPY lost momentum around 155.75 in early Asian session on Thursday, down 0.30% on the day.
- Japan’s exports rose for the seventh consecutive month in June.
- Rising odds of US rate cuts and dovish messaging from the Fed are likely to cap the pair’s upside.
The USD/JPY pair attracts some sellers near 155.75 on Thursday during early trading hours in Asia. The pair is lower due to the broad weakness of the US Dollar (USD) and speculation about a Bank of Japan (BoJ) intervention. The US weekly initial jobless claims and the Philly Fed manufacturing index are due for release on Thursday, along with the speech by Fed’s Lorie Logan.
Traders suspect another foreign exchange (FX) intervention by Japanese authorities to support the Japanese Yen (JPY) from multi-decade lows. This, in turn, could support the JPY in the short term and limit the pair’s upside.
Data released by the Finance Ministry on Thursday showed Japan’s trade balance for the year ended June rose to ¥224B from -¥1,220.1B previously, better than estimated. Meanwhile, the country’s exports grew 5.4% year-on-year in June from a 13.5% increase in May, below the 6.4% forecast. Imports rose 3.2%, compared with 9.5% previously, below the market consensus of 9.3%.
As for the USD, markets see a small chance of a rate cut of at least 25 basis points (bps) at the Fed’s July meeting, but price in a 100% chance of a reduction in September, according to the CME’s FedWatch tool. Mounting bets on a Fed rate cut are putting some selling pressure on the USD against the JPY.
Moreover, dovish bets on the Fed continue to weaken the USD in the near term. Fed Governor Christopher Waller said on Wednesday that the US central bank is “getting close” to an interest rate cut. Meanwhile, Richmond Fed President Thomas Barkin stated that the decline in inflation had begun to widen and he would like to see it continue.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the spread between Japanese and US bond yields, and risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key to the Yen. The BoJ has intervened directly in currency markets on occasion, usually to lower the value of the Yen, although it often refrains from doing so due to political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its major currency peers. This process has been exacerbated more recently by a growing policy divergence between the BoJ and other major central banks, which have opted to sharply raise interest rates to combat decades-old levels of inflation.
The Bank of Japan’s stance of maintaining an ultra-loose monetary policy has led to an increase in policy divergence with other central banks, in particular with the US Federal Reserve. This favours the widening of the spread between US and Japanese 10-year bonds, which favours the Dollar against the Yen.
The Japanese Yen is often considered a safe haven investment. This means that in times of market stress, investors are more likely to put their money into the Japanese currency due to its perceived reliability and stability. In turbulent times, the Yen is likely to appreciate against other currencies that are considered riskier to invest in.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
