Japanese Yen languishes near multi-decade low despite intervention fears, risk-off


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  • The Japanese Yen meets with a fresh supply on Wednesday, albeit lacks follow-through.
  • The BoJ’s dovish stance undermines the JPY, though intervention fears limit the downside.
  • Reduced bets for a June Fed rate cut lend support to the Greenback and the USD/JPY pair.

The Japanese Yen (JPY) attracts fresh sellers on Wednesday and erodes a part of the overnight modest gains, albeit lacks follow-through and remains confined in a two-week-old trading range heading into the European session. The Bank of Japan’s (BoJ) dovish outlook, saying that monetary policy will remain easy for some time, is seen as a key factor that continues to undermine the JPY. However, speculations that Japanese authorities will intervene in the markets to prop up the domestic currency might hold back the JPY bears from placing aggressive bets. 

Apart from this, a softer risk tone could lend support to the safe-haven JPY, which, along with subdued US Dollar (USD) price action, might contribute to capping the upside for the USD/JPY pair. The markets, meanwhile, have been scaling back their bets for early interest rate cuts by the Federal Reserve (Fed), suggesting that the gap between US and Japanese interest rates will stay wide. This could drive flows away from the JPY and support prospects for a further appreciating move for the currency pair as traders now look to the US macro data for a fresh impetus. 

Daily Digest Market Movers: Japanese Yen bulls remains on the sidelines amid BoJ’s dovish outlook

  • Japanese Finance Minister Shunichi Suzuki repeated his warning that authorities were ready to take appropriate action against excessive exchange-rate volatility and offered some support to the Japanese Yen.
  • The uncertainty over the Federal Reserve’s plans to cut interest rates, along with persistent geopolitical risks, tempers investors’ appetite for riskier assets and further benefits the JPY’s relative safe-haven status.
  • The Bank of Japan struck a dovish tone at the end of the March meeting and stopped short of offering any guidance about future policy steps, or the pace of policy normalization, which caps gains for the JPY.
  • Odds of a June Fed rate cut dip below 50% after data released this week showed that the US manufacturing sector expanded in March for the first time since September 2022 and that demand for labor remains elevated.
  • The US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday that the number of job openings on the last business day of February stood at 8.75 million.
  • A separate report by the Commerce Department’s Census Bureau showed that new orders for US-manufactured goods rebounded more than expected, by 1.4% in February following a 3.8% drop in the previous month.
  • San Francisco Fed President Mary Daly said on Tuesday that inflation is gradually decreasing, though the process is erratic and gradual, and that maintaining the status quo is the appropriate policy at present.
  • Adding to this, Cleveland Fed President Loretta Mester expects the central bank to cut rates later this year, though noted that moving rates down too soon would risk undoing the progress made on inflation.
  • This comes on the back of Fed Chair Jerome Powell’s remarks on Friday, saying that there was no need to be in a hurry to cut interest rates and raised doubts if the central bank will cut rates three times this year.
  • The yield on the benchmark 10-year US government bond advanced to a four-month high, helping the US Dollar to stall the overnight pullback from a multi-month top and acting as a tailwind for the USD/JPY pair.

Technical Analysis: USD/JPY seems poised to appreciate further, move beyond 152.00 or multi-decade top awaited

From a technical perspective, the range-bound price action witnessed over the past two weeks or so might still be categorized as a bullish consolidation phase against the backdrop of a strong rally from the March swing low. Moreover, oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought zone. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the upside. That said, bulls might need a sustained breakout through the trading range resistance, around the 152.00 mark, or a multi-decade high before positioning for any further appreciating move.

On the flip side, the lower end of the aforementioned trading range, around the 151.10-151.00 area, is likely to protect the immediate downside. Some follow-through selling below the 150.85-150.80 horizontal resistance breakpoint, now turned support, could expose the next relevant support near the 150.25 area. This is closely followed by the 150.00 psychological mark, which if broken decisively might turn the USD/JPY pair vulnerable to accelerate the corrective decline further towards the 149.35-149.30 region before eventually dropping to the 149.00 mark.

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 current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.

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 supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.

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.