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USD/JPY stabilizes after massive slideThe Japanese yen has edged lower on Friday, after posting huge gains a day earlier. USD/JPY is trading at 159.16 in the European session, up 0.26% on the day at the time of writing. The US dollar was down against most of the major currencies on Thursday, after a softer--than-expected US CPI report raised expectations for a rate cut in September. The yen was the big winner on the day, surging as much as 2.7% and climbing to 157.41 against the dollar. The US dollar recovered some of these losses and USD/JPY closed at 158.76, down 1.8% on the day. US inflation fell to 3.0% y/y/ in June, its lowest level in a year. This was down from 3.3% in May and below the market estimate of 3.1%. The monthly reading was impressive at -0.1%, the first decline since May 2020. Core inflation also eased in June and market expectations for a September rate cut have jumped to 86%, compared to 69% a day just prior to the inflation report. The Federal Reserve has gone to great lengths to dampen rate cut expectations but may send a more dovish signal to the markets following the very soft inflation data. The US dollar had a bad day at the office on Thursday but the extent of the slide against the yen raised suspicions that Tokyo had intervened in the currency markets. A report on Japanese TV said that the government and the Bank of Japan had intervened after the US dollar posted losses following the US inflation report. Japan’s chief currency diplomat, Masato Kanda, didn’t surprise anyone by saying “no comment” as to whether there was an intervention on Thursday. Japan is embroiled in a constant cat-and-mouse game with yen speculators and its policy is to keep market participants in the dark about currency interventions. With the Bank of Japan signaling that it plans to tighten policy, we can expect additional volatility from the Japanese currency. USD/JPY tested resistance at 159.37. Above, there is resistance at 161.30 There is support at 156.97
by OANDA
USD/JPY slides – did Tokyo intervene?It has been a remarkable week for the yen, which has exhibited sharp swings throughout the week. The Japanese yen fell as much as 1% earlier and on Thursday but has pared most of those losses. USD/JPY has risen 0.38% to 155.19 at the time of writing. Japan suspected of intervention In the Asian session, the yen fell as low as 157.55 but then recovered to precisely 153. The reason for the swing is unclear but there are strong suspicions that Japan’s Ministry of Finance (MoF) ordered another round of intervention. Japan’s top currency official, Masota Kanda, refused to comment on whether Japan had intervened. Kanda was also mum about whether there was intervention on Monday, when the yen spiked and fell below the 160 level before recovering. Money market movements indicate that the MoF did intervene on Monday, selling as much as $35 billion to prop up the yen. The yen’s swings Monday and today could signal that the MoF has targeted 160 as its “line in the sand” for intervention. Fed holds rates, US dollar slips There was no surprise from the Federal Reserve which maintained the benchmark rate in the target range of 5.25% to 5.50% on Wednesday. This marked a six straight pause, as Fed Chair Powell was clear that high inflation has delayed rate cuts. The rate statement said that inflation had fallen in the past year but there was a lack of progress towards the 2% inflation target in recent months. At a press conference, Powell said that the Fed was not yet confident that inflation was falling closer to the target. Consumer inflation has been moving higher and the US economy remains surprisingly strong, which has complicated the Fed’s plan to provide relief to households by lowering rates. Still, the Powell said the next rate move was unlikely to be a hike, which sent the US dollar broadly lower against the majors on Wednesday. The yen soared as much as 3.2% against on the dollar after the rate announcement and closed on Wednesday with gains of 2%. USD/JPY is testing resistance at 155.13. Above, there is resistance at 157.26 There is support at 152.27 and 150.14
by OANDA
USD/JPY punches above 140, Tokyo issues warningUSD/JPY is showing little movement on Tuesday. In the European session, USD/JPY is trading at 140.17, down 0.19%. The Japanese yen continues to underperform and has plunged 2.8% in May. The yen fell as low as 140.93 on Monday, its lowest level since November 21st. The sharp depreciation is raising concerns in Tokyo and Masota Kanda, a top official at the Ministry of Finance (MOF) weighed in on Tuesday. Kanda said officials were not focussing on particular exchange rate levels but said they were monitoring the forex market and "would respond appropriately". Kanda's veiled warning should not be ignored, as he blindsided the markets back in December when the MoF intervened in the currency markets in order to prop up the yen. Japanese releases have been solid, reinforcing speculation that inflation isn't going anywhere and the Bank of Japan may have to tighten policy. Service and manufacturing PMIs showed slight expansion last week and retail sales and industrial production will be released on Wednesday. Retail sales are expected to remain strong at 7.0% y/y in April, following a prior reading of 7.1%. Industrial production is projected to improve to 1.5% m/m in April, up from 1.1% in March. President Biden and Republican Speaker McCarthy have reached an agreement in principle on the debt ceiling, after weeks of brinkmanship between Republicans and Democrats. The deal must be approved in both houses of Congress, which is expected to happen despite grumblings from some Republicans. The weeks of uncertainty prior to the deal weighed on risk appetite and the big winners have been US Treasury yields and the US dollar. USD/JPY has support at 139.61 and 138.50 There is resistance at 140.88 and 141.73
by OANDA
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