USD/JPY slides below mid-148.00s, downside potential seems limited

Source Fxstreet
  • USD/JPY retreats after touching its highest level since August 16 amid intervention fears. 
  • Reduced bets for more BoJ rate hikes and an oversized Fed rate cut should lend support.
  • Any meaningful corrective slide could be seen as a buying opportunity and remain limited.

The USD/JPY pair struggles to capitalize on a modest Asian session uptick or find acceptance above the 149.00 mark and retreats a few pips from its highest level since August 16 touched this Monday. Spot prices slide below mid-148.00s, or a fresh daily low in the last hour and for now, seem to have snapped a three-day winning streak, though the fundamental backdrop warrants caution for bearish traders. 

Japan's Finance Ministry's Vice Finance Minister for International Affairs Atsushi Mimura said that the government will monitor FX moves including speculative movement, fueling speculations about a possible intervention. This, in turn, offers some support to the Japanese Yen (JPY) and attracts some sellers around the USD/JPY pair. That said, diminishing odds for another interest rate hike by the Bank of Japan (BoJ) in 2024 and a more aggressive policy easing by the Federal Reserve (Fed) should continue to act as a tailwind for the currency pair. 

New Japanese Prime Minister Shigeru Ishiba stunned markets last week and said that the economy was not ready for further rate hikes. Apart from this, political uncertainty ahead of a general election on October 27 might keep the JPY bulls on the sidelines. Meanwhile, the upbeat US monthly jobs data released on Friday forced investors to further scale back their bets for an oversized rate cut by the Fed in November. This assists the US Dollar (USD) to preserve its recent strong gains to a seven-week top and should act as a tailwind for the USD/JPY pair. 

This, in turn, suggests that any subsequent slide might still be seen as a buying opportunity, making it prudent to wait for strong follow-through selling before confirming that a one-week-old uptrend has run out of steam. Moving ahead, there isn't any relevant market-moving economic data due for release on Monday. That said, speeches by influential FOMC members might influence the USD later during the North American session. Apart from this, geopolitical developments should provide short-term impetus to the USD/JPY pair.

Japanese Yen FAQs

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Bitcoin CME gaps at $35,000, $27,000 and $21,000, which one gets filled first?Prioritize filling the $27,000 gap and even try higher.
Author  FXStreet
Aug 21, 2023
Prioritize filling the $27,000 gap and even try higher.
placeholder
Natural Gas sinks to pivotal level as China’s demand slumpsNatural Gas price (XNG/USD) edges lower and sinks to $2.56 on Monday, extending its losing streak for the fifth day in a row. The move comes on the back of China cutting its Liquified Natural Gas (LNG) imports after prices rose above $3.0 in June. It
Author  FXStreet
Jul 01, Mon
Natural Gas price (XNG/USD) edges lower and sinks to $2.56 on Monday, extending its losing streak for the fifth day in a row. The move comes on the back of China cutting its Liquified Natural Gas (LNG) imports after prices rose above $3.0 in June. It
placeholder
Nvidia vs. Broadcom: Which Is the Better AI Chip Stock to Own in 2025?When it came to artificial intelligence (AI) infrastructure in 2024, Nvidia (NASDAQ: NVDA) reigned supreme.
Author  The Motley Fool
Dec 19, Thu
When it came to artificial intelligence (AI) infrastructure in 2024, Nvidia (NASDAQ: NVDA) reigned supreme.
placeholder
American Express: Buy, Sell, or Hold?American Express (NYSE: AXP) shares have been on an absolute tear. In the past 14 months, they have catapulted 100% higher (as of Dec. 16), consistently hitting fresh all-time high
Author  The Motley Fool
23 hours ago
American Express (NYSE: AXP) shares have been on an absolute tear. In the past 14 months, they have catapulted 100% higher (as of Dec. 16), consistently hitting fresh all-time high
placeholder
US Dollar hits fresh two-year high ahead of PCE inflationThe US Dollar (USD) retreats slightly on Friday, with the DXY Index trading at around 108.20 after eking out another fresh two-year high of 108.55 during the Asian-Pacific trading session. The move was supported by rising US Treasury yields, widening
Author  FXStreet
23 hours ago
The US Dollar (USD) retreats slightly on Friday, with the DXY Index trading at around 108.20 after eking out another fresh two-year high of 108.55 during the Asian-Pacific trading session. The move was supported by rising US Treasury yields, widening
Related Instrument
goTop
quote