Japanese Yen news update:
The Japanese Yen (JPY) edges lower as the Bank of Japan (BoJ) maintains its interest rate at 0% following Friday’s meeting. In a strategic move to provide long-term interest rates more flexibility, the BoJ has decided to cut back on bond purchases. Policymakers are set to finalize a detailed plan for this reduction, aiming to implement it over the next 1-2 years, during their upcoming policy meeting.
Reports from the Nikkei suggest that the BoJ is considering a decrease in its Japanese government bond holdings. Currently, the BoJ targets around ¥6 trillion (approximately $38.5 billion) in monthly bond purchases. The central bank has announced plans to adjust this range to between ¥4.8 trillion and ¥7 trillion per month.
Meanwhile, the US Dollar Index (DXY), which tracks the value of the US Dollar (USD) against six major currencies, has edged higher despite weaker-than-expected economic data released on Thursday. The US Producer Price Index (PPI) came in softer than anticipated, and Initial Jobless Claims were higher than forecasted. Nonetheless, the USD’s strength is bolstered by the US Federal Reserve’s (Fed) hawkish stance.
Federal Open Market Committee (FOMC) policymakers have revised their outlook, now projecting only one rate cut for the year, down from the three cuts forecasted in March. This shift suggests a more aggressive approach to managing inflation and economic stability, contributing to the USD’s resilience.
Investors are now awaiting the preliminary US Michigan Consumer Sentiment index, which is scheduled for release on Friday. This index will offer further insights into consumer confidence and economic outlook.
Daily Digest Market Movers: Japanese Yen Declines Due to Dovish BoJ
Japanese Finance Minister Shunichi Suzuki stated on Friday his commitment to achieving the primary balance goal. He also mentioned monitoring China’s excess production and its impact on the Japanese economy, according to Reuters.
US Initial Jobless Claims for the week ending June 7 increased significantly, rising by 13,000 to 242,000, surpassing market expectations of 225,000, marking the highest level of jobless claims since August 2023. Additionally, the US Producer Price Index (PPI) showed a weaker-than-expected increase of 2.2% YoY in May, compared to 2.3% in April (revised from 2.2%). The core PPI figure rose 2.3% YoY in May, below the consensus and April’s reading of 2.4%.
The Federal Open Market Committee (FOMC) kept its benchmark lending rate in the range of 5.25%–5.50% for the seventh consecutive time in its policy meeting on Wednesday, as anticipated. Fed Chair Jerome Powell noted that the restrictive stance on monetary policy is having the desired effects on inflation.
Japan Finance Minister Shunichi Suzuki emphasized the importance of continuing efforts to achieve economic growth and fiscal health to maintain confidence in the country’s fiscal policy, as per Reuters. Bank of Japan (BoJ) Governor Kazuo Ueda mentioned last week in parliament that inflation expectations are gradually rising but have yet to reach 2%. He highlighted the necessity of reducing bond purchases as the BoJ moves to exit its massive monetary stimulus.
Japanese Yen news update:
Technical Analysis: USD/Japanese Yen Moves Above Key Level of 157.00
USD/JPY is trading around 157.20 on Friday. The daily chart analysis shows a bullish bias, with the pair consolidating within an ascending channel pattern, typically indicating a continuation of the upward trend. As long as the price remains within this channel, it is likely to keep rising.
The USD/Japanese Yen pair may encounter a significant resistance at the psychological level of 158.00. Breaking above this level could see the pair target the upper boundary of the ascending channel near 159.20. The major resistance level at 160.32, recorded in April as the highest level in over thirty years, remains a critical barrier.
On the downside, support is observed at the lower boundary of the ascending channel around the 50-day Exponential Moving Average (EMA) at 155.18. A breach below this level could increase downward pressure on the USD/Japanese Yen pair, potentially driving it towards the throwback support area around 152.80.
