The Japanese Yen Struggles Amidst Economic Uncertainty
- The Japanese Yen fails to build on the previous day’s recovery from a multi-month low.
- The Bank of Japan (BoJ) rate-hike uncertainty and the risk-on mood cap gains for the safe-haven JPY.
- Renewed USD buying interest and elevated US bond yields offer support to USD/JPY.
On Friday, the Japanese Yen (JPY) faces challenges in attracting buyers as it fluctuates between modest gains and losses against the US Dollar. Despite recent verbal interventions from Japanese authorities providing some support to the JPY, doubts surrounding the BoJ’s ability to further hike interest rates hinder its gains.
Factors Influencing the Japanese Yen’s Performance
- Japan’s household spending declined by 1.3% in September, impacting the economy.
- Inflation-adjusted wages in Japan also fell for the second consecutive month, posing challenges for the BoJ’s rate hike plans.
- Trump’s victory in the US election led to the USD/JPY pair surpassing the 154.00 mark, triggering verbal interventions from Japanese authorities.
- Japanese government officials express vigilance over FX market movements and readiness to take action against excessive volatility.
- Japan spent ¥5.53 trillion on currency intervention during a specific period, indicating efforts to stabilize the Yen.
- The Federal Reserve’s dovish outlook and rate cuts contribute to higher US bond yields, supporting the USD and limiting JPY gains.
Technical Analysis of USD/JPY Pair
From a technical standpoint, the USD/JPY pair faces key support levels at 152.70-152.65, below which a corrective decline towards 152.00 is possible. On the upside, resistance lies at 153.50 and 153.85-153.90, with potential for a move towards the multi-month peak at 154.70.
Insights into the US Dollar
The US Dollar (USD) plays a pivotal role in global currency markets and is heavily influenced by the Federal Reserve’s monetary policy decisions. Factors affecting the USD include:
- Monetary policy adjustments by the Federal Reserve impact USD value, with rate hikes strengthening the Dollar.
- Quantitative easing (QE) involves the Fed printing more Dollars to buy bonds, usually leading to a weaker USD.
- Quantitative tightening (QT) is the reverse process, which can strengthen the US Dollar.
Understanding these dynamics provides insights into the broader economic landscape and how currency movements impact financial markets.