- Japanese yen has fallen sharply against the dollar, prompting speculation among traders about when the authorities might start buying the currency to support it - and why they haven't already done so
- . According to forex trading platforms, the currency fell to a 34-year low against the dollar on Friday after the Bank of Japan indicated that financial conditions would remain easy, with losses accelerating in late trading in New York.
- The public holiday in Japan today, Monday, could reduce liquidity in forex markets and increase the risk of further sharp moves in either direction.
Recently, USD/JPY jumped to 158.44 from 154.96 in the same trading session on Friday, its best daily performance in months.
Japanese policymakers have repeatedly warned that a further and rapid depreciation of the currency will not be tolerated. In this regard, Finance Minister Shunichi Suzuki said after a Bank of Japan meeting that the government would respond appropriately to forex moves. Earlier this month, US Treasury Secretary Janet Yellen also expressed concerns about the yen's decline, which market participants saw as laying the groundwork for intervention.
Masato Kanda, a senior currency official, gave an example of a 10 yen move in a month as a rapid move. Consequently, the yen has fallen by about 7 yen per dollar over the past month, but is down more than 2% in the past week alone, and is down more than 10% since the beginning of the year.
Amid this performance, the debate about the US Federal Reserve’s interest rate cut is shifting from “when” to “if” based on inflation data. The debate around the Federal Reserve has begun to shift from how many times it should cut interest rates this year to whether to cut them at all in 2024. Moreover, with policymakers widely expected to keep US interest rates steady at their highest level in 2024, More than two decades at the conclusion of their meeting next Wednesday, much of the focus will be on any pivot in the tone of Chairman Jerome Powell's post-meeting statement and news conference.
Also, officials are expected to announce a near-term slowdown in reducing the US Federal Reserve's $7.4 trillion balance sheet - a move independent of any decision on interest rate timing. Policymakers have expressed the need to take a cautious approach to further returns, in the hope of avoiding market disruptions.
After worse-than-hoped US inflation reports during the first three months of the year, Powell said it would likely take "longer than expected" to become confident that inflation was moving towards the central bank's 2% target. He added, “the central bank can keep interest rates high as long as necessary.” While the Fed's leadership has suggested delaying US interest rate cuts, it is starting to look like a real possibility that policymakers may not cut interest rates at all this year.
USD/JPY Technical analysis and Expectations Today:
Amidst breaking through significant technical and psychological barriers, the price of the USD/JPY currency pair is on its way to test the historical psychological resistance at 160.00 in the nearest time unless there is a Japanese intervention in the forex markets at any time. It may remain stable around its current gains, which have propelled all technical indicators towards levels saturated with buying pressure until reacting to the announcement from the US Federal Reserve Bank and US job figures.
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