CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

USD/JPY has moved back to within touching distance of the highs from the last couple of years at just below the 152.00 level. Economists at MUFG Bank analyze the pair’s outlook.

Renewed Yen weakness is drawing more concern from Japanese policymakers

• USD/JPY drops slightly after intervention talk from Japan’s chief of FX, Masato Kanda. 
• Recent weakness in the Yen should be attributed to speculation not fundamentals, Kanda said. 
• The authorities may intervene to correct the situation, propping up the Yen. 

USD/JPY is trading down almost a tenth of a percent in the 151.300s at the start of the new week. It has lost ground after intervention talk from Japan’s currency chief heightens speculation the Japanese authorities are about to use market operations to prop up their currency. 

Vice-finance minister for international affairs Masato Kanda, was responding to the weakness experienced by the Yen, which remains at historic lows, after the Bank of Japan’s (BoJ) historic decision to raise interest rates for the first time since 2007 at their policy meeting last Tuesday. The move seemed highly unexpected since higher interest rates are usually a factor that strengthens not weakens currencies.

"The current weakening of the Yen is not in line with fundamentals and is clearly driven by speculation,” Kanda told reporters Monday. "We will take appropriate action against excessive fluctuations, without ruling out any options,” he said, according to a report in the Japan Times. 

When questioned about the possibility of the authorities engaging in direct intervention, or Yen-buying in the open market Kanda said, “We are always prepared.” 

USD/JPY has reached a level, above 150.000, where historically the BoJ has been known to intervene to prop it up, as was the case in 2022 when the currency hit 151.950 against the US Dollar.

Data from the currency futures market seems to support Kanda’s view that speculators drove the move higher following the BoJ decision. During the week of the BoJ’s March meeting, speculators, such as hedge funds, actually increased their bearish (short) bets on the Yen, according to data from the Commodity Futures Trading Commision (CFTC), despite widespread rumors the BoJ was going to hike rates. 

From a technical perspective the USD/JPY has formed a bearish Hanging Man Japanese candlestick pattern (circled) on Thursday, suggesting a heightened risk of a short-term reversal and pullback. 

US Dollar versus Japanese Yen: Daily chart

The combination of the fact that the pair has tested the level of the 2023 and 2022 intervention highs, and at the same time formed the bearish pattern increases the possibility of a decline following on. 

Friday’s red candlestick adds confirmation to the Hanging Man from Thursday, and further increases the odds of more downside. 

Japanese candlesticks are only short-term reversal patterns, however, so the move lower may be short-lived.  

A continuation of the pullback might be expected to go as low as support at the 50-day Simple Moving Average (SMA) situated at 149.123. 

Alternatively, a recovery and clear break above 152.000 would suggest bulls continue to have the upper hand and the BoJ is reluctant or unable to intervene sufficiently to move the exchange rate.  

Such a move, however, would be unlikely to rise much higher given the forces pitched against it, with a possible target at the next whole number of 153.000.

• USD/JPY extends losses on the likelihood of reaching the BoJ's inflation target.
• BoJ members discussed the potential implementation of measures if a positive cycle of wages and inflation is confirmed.
• The US Dollar could face challenges on expectations of the Fed’s initiating rate cuts from June.

USD/JPY continues its decline, nearing 151.20 during the Asian session on Monday. This movement follows the release of the Bank of Japan (BoJ) Minutes from the January policy meeting. BoJ Board members acknowledged an increasing likelihood of reaching the central bank's inflation target, albeit gradually.

Furthermore, members discussed the possibility of measures if a positive cycle of wages and inflation is confirmed. Some policymakers noted that the risk of inflation significantly exceeding expectations has diminished.

Moreover, the Japanese Yen (JPY) may receive support from potential forex intervention. Japan's top currency diplomat, Masato Kanda, issued a warning, stating his intention to take appropriate action to address excessive JPY weakness, without ruling out any measures.

The US Dollar Index (DXY) weakens despite higher US Treasury yields. However, the US Dollar (USD) saw a sharp rise following hawkish remarks from Federal Reserve Bank of Atlanta President Raphael Bostic on Friday. Bostic revised his earlier forecast of two interest rate cuts this year, now expecting only one, citing persistent inflation and stronger-than-expected economic data.

Nonetheless, the USD may encounter downward pressure on expectations for the initiation of a Federal Reserve easing cycle, anticipated to start in June. Despite higher inflation readings, the Federal Reserve has downplayed concerns, with Chairman Jerome Powell assuring markets that the central bank will not hastily react to two consecutive months of increased inflation figures.

• USD/JPY forms a bearish candlestick pattern at the multi-year highs. 
• A bearish close on Friday would enhance the possibilities of a pullback. 
• The BoJ has historically intervened to strengthen JPY in the 151.000s, indicating more downside pressure likely. 

USD/JPY has formed a bearish Hanging Man Japanese candlestick pattern (circled) at key chart highs in the 151.000s on Friday, suggesting a heightened risk of a short-term reversal and pullback. 

US Dollar versus Japanese Yen: Daily chart

The combination of the fact that the pair has tested the level of the 2023 high and formed the bearish pattern increases the possibility of a decline following on. 

If Friday ends as a bearish red candlestick this will add confirmation to the Hanging Man formed on Thursday, and further increase the odds of more downside. 

Japanese candlesticks are only short-term reversal patterns, however, so the move lower may be short-lived. 

The fact that the 151.000s represents a zone in which the Bank of Japan (BoJ) has been known to intervene to strengthen the Yen in the past, further increases the chances of imminent weakness for the pair. 

A pullback might be expected to go as low as support at the 50-day Simple Moving Average (SMA) situated at 149.009. 

Alternatively, a recovery and clear break above 152.000 would suggest bulls continue to have the upper hand and the BoJ is reluctant or unable to intervene sufficiently to move the exchange rate.  

Such a move, however, would be unlikely to rise much higher given the forces pitched against it, with a possible target at the next whole number of 153.000.

• USD/JPY falls to 151.00 even though the appeal for the US Dollar is upbeat.
• The USD Index refreshes monthly high on upbeat US economic outlook.
• Japan’s hot inflation for February has improved the credibility of BoJ’s shift to policy normalization.

The USD/JPY pair slips to 151.00 in Friday’s late European session. The Japanese Yen has been underpinned against the US Dollar as Japan’s hot February inflation data improved investors' confidence in the Bank of Japan’s (BoJ) decision to pivot to policy normalization. The asset faces pressure despite the buoyant US Dollar amid a significant improvement in the United States economic outlook.

The Statistics Bureau of Japan reported that Japan’s annual National headline Consumer Price Index (CPI) grew at a stronger pace of 2.8% compared to the prior release of 2.2%. BoJ’s preferred inflation measure that excludes fresh food rose by 2.8%, as expected, compared to the former reading of 2.2%. Price pressures remaining consistently above the 2% target will allow the BoJ to maintain interest rates positive despite maintaining an accommodative stance.

Also, increasing speculation about Japan’s government intervening in the FX domain provides support to the Japanese Yen. Japan's Finance Minister Shunichi Suzuki said that currencies must move in a stable manner and that he is closely watching foreign exchange moves with a high sense of urgency.

Meanwhile, the US Dollar Index (DXY) refreshes its monthly high at 104.44 as investors hope that rate cuts by the Federal Reserve (Fed) won’t be so aggressive due to the upbeat US economic outlook. The outlook for the US economy improved after the Federal Reserve (Fed) upwardly revised growth forecasts for 2024. The Fed sees the US Gross Domestic Product (GDP) growing by 2.1%, up from the 1.4% it projected in December.

USD/JPY is consolidating around 151.60 and struggling to break above its November 2023 high of 151.91. Economists at BBH analyze the pair’s outlook.

Threat of FX intervention is offering JPY support

• USD/JPY rebounds to 151.00 as the US Dollar bounces back.
• Upwardly revised US economic outlook has supported the US Dollar.
• Rising expectations for Japan’s intervention fail to offset BoJ’s accommodative guidance.

The USD/JPY pair finds support after correcting to near 150.27 in the European session on Thursday. The asset rebounds as the US Dollar recovers after refreshing a five-day low. The US Dollar Index (DXY) bounces back from 103.17 as the Federal Reserve’s (Fed) latest economic projections showed that the United States growth rate for 2024 was revised higher to 2.1% from 1.4% forecasted in December’s policy meeting.

There is a region-specific demand in the global markets. Risk-sensitive assets in Europe are facing pressure as the Swiss Nation Bank (SNB) surprisingly reduced interest rates by 25 basis points (bps) to 1.25% while demand for antipodeans and Asian currencies is upbeat. S&P 500 futures have posted significant gains in the London session.

The market sentiment is broadly upbeat as the Fed’s dot plot for the March meeting, released on Wednesday, indicated that three rate cut projections for this year remain alive. In the monetary policy statement, Fed Chair Jerome Powell said that he is confident in the story of easing underlying price pressures despite recent hot inflation readings.

This has led to a sharp increase in speculation that the Fed will begin rate cuts from the June policy meeting. The CME FedWatch tool shows that there is a 74% chance that a rate cut will be announced in June.

Meanwhile, the Japanese Yen rose against the US Dollar after speculation of stealth intervention in the FX domain escalated. Japan's Finance Minister Shunichi Suzuki said, "Currencies must move in a stable manner and that he is closely watching foreign exchange moves with a high sense of urgency."

However, the Japanese Yen struggles to hold strength as the near-term guidance for the monetary policy by the Bank of Japan (BoJ) is still accommodative despite exiting the expansionary policy stance.

• USD/JPY took a quick plunge into 151.25 after Fed held rates.
• FOMC sees slightly higher rates in the future than previously expected.
• Markets shrug off higher growth forecast, price in additional easing.

USD/JPY took a quick dive into 151.25 after the Federal Reserve (Fed) held its main reference rate at 5.5% as markets had broadly predicted. Risk-hungry investors are shrugging off higher-than-previous growth expectations and interest rate forecasts from the Federal Open Market Committee (FOMC). According to the FOMC, US Gross Domestic Product (GDP) growth through 2024 is going to be slightly higher than forecast, and year-end interest rates are likely to be higher than previously expected.

Despite upside shifts to the Dot Plot, the Fed still expects three rate cuts through 2024 for around 75 basis points, and markets are keeping hopes of near-term rate trimming to begin closer to the middle of the year. Fed Chairman Jerome Powell is due at the bottom of the hour at 18:30 GMT.

Read more: Fed leaves interest rate unchanged at 5.25%-5.5% as forecast

USD/JPY 5-minute chart

• USD/JPY rallies up to multi-year highs in the 151.000s – a historical BoJ intervention zone. 
• The move is backed by USD strength as interest rates are seen remaining high in the US. 
• The BoJ raised interest rates but this did not defend the Yen as expected, since Japanese rates remain extremely low. 

The USD/JPY rallies to multi-year highs in the 151.000s on Wednesday on the back of broad-based US Dollar (USD) strength ahead of the Federal Reserve policy meeting and a “one and done” trade weakening the Japanese Yen (JPY). 

The USD/JPY is reaching an intervention zone where the Bank of Japan (BoJ) has historically been known to intervene in FX markets to prop up the Yen, and this could provide an obstacle to more upside for the pair. 

USD/JPY enters intervention zone 

The USD/JPY has rallied back up to the level of previous multi-year highs in the 151.000s. Both  in October 2022 and 2023 the pair rose to the 151.000s amid JPY weakness and USD strength, however, both times it was pushed back down. 

The reason for the reversal at this level has been put down to the fact it is an intervention zone for the BoJ. Above 150.000 the Yen becomes uncomfortably weak for the BoJ and it tends to intervene to prop it up using its FX reserves to buy Yen, according to analysts at MUFG. 

“A break of that high (2023 high) could well be accepted in Tokyo but we would still assume intervention would happen quite soon after that, especially with the BoJ’s action this week at least now consistent with Yen buying intervention.”

This suggests USD/JPY could be close to a peak. 

Yen weakens after BoJ meeting, in counter-intuitive move

The Yen has sold-off after the Bank of Japan (BoJ) ended eight years of negative interest rates and made its first interest rate hike since 2007. On Tuesday, the BoJ raised interest rates from minus 0.1% to a range between 0.0% and 0.1%. 

Normally such a move would be expected to strengthen a currency, since higher interest rates attract greater inflows of foreign capital, however, in the case of the Yen the opposite happened. 

One reason given for the Yen’s counter-intuitive response is that despite the hike, interest rates in Japan are still so low relative to other countries that JPY remains a favored “funding currency” by international investors. This means they borrow in the Yen (because of the low interest repayments) in order to buy other currencies which pay higher interest rate returns. 

“The broad-based view is that the gulf in interest rates between Japan and many other central banks in the G10 space means that the Yen will still be used as a funding currency in a low-volatility world.” Say analysts at ING. 

A further reason for the Yen weakness following the BoJ decision is the view that the interest rate hike was just a “one off” rather than the start of the hiking cycle. 

“While the BoJ may be able to hike rates again this year, this prospect currently remains highly uncertain.” Say analysts at Rabobank. 

Much depends on whether wage gains negotiated by Japanese workers’ unions percolate out to the wider working population, since only 30% of workers belong to unions. 

“Assuming the strong pay deals awarded to unionised workers spread out to the 70% of employees who are not in a union, Japan’s real wage growth could soon be turning higher. Policymakers will be hoping that this boosts consumption which in turn supports corporate profitability. This would indicate that the BoJ’s virtuous cycle is complete.” Says Rabobank. 

USD/JPY rally put down to USD strength 

The US Dollar is gaining ground across the board on the back of expectations the Federal Reserve (Fed) will keep interest rates higher for longer in the US, due to stubbornly high inflation. This too is a factor in the USD/JPY’s gains. 

There is even speculation that the Fed will reduce the number of rate cuts it expects to make in its Summary of Economic Projections (SEP), a set of forecasts which it publishes at the same time as it announces its monetary policy decision. 

In the December SEP the Fed forecast three 0.25% rate hikes in 2024, but analysts at Nordea Bank and Macquarie, to name two, are expecting that to be reduced to two cuts in the March SEP.

Such a move would be even more bullish for USD and USD/JPY.

USD/JPY rallied on what in the end was a widely expected BoJ rate hike. Economists at ING analyze the pair’s outlook.

More of a Dollar story

USD/JPY has risen back above the 150.00 level after the BoJ finally ended its negative interest rate policy. Economists at Rabobank analyze the pair’s outlook.

BoJ prospects of hiking rates again this year remain highly uncertain

USD/JPY rose back above 150.00 after the Bank of Japan abolished negative interest rates and yield curve control. Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes the pair’s outlook.

A well-flagged BoJ move has emboldened Yen bears

Economists at MUFG Bank analyze Japanese Yen (JPY) outlook after the Bank of Japan (BoJ) policy announcement.

Will Yen selling persist after BoJ policy changes?

USD/JPY traded back above 150.00 after the BoJ exited its Negative Interest Rate Policy (NIRP). Economists at TD Securities analyze the pair’s outlook.

BoJ exited NIRP and YCC simultaneously

• Heavy week for USD/JPY with BoJ and Fed in the barrel.
• Bank of Japan widely anticipated to pivot away from negative rates.
• Fed to update Dot Plot of interested rate expectations on Wednesday.

USD/JPY is churning chart paper just above the 149.00 handle as investors gear up for a central-bank-heavy week. The Bank of Japan (BoJ) is expected to deliver an update on its negative interest rate regime early in the Tuesday market session after Japan’s spring wage negotiations showed the highest wage increases in over three decades. The Federal Reserve (Fed) is also expected this week and will drop its latest Dot Plot summary of interest rate projections on Wednesday.

The BoJ widely telegraphed that any moves on interest rates would hinge on the results of spring wage negotiations in Japan. Union-negotiated wage increases soared over 5% this year, a 31-year high. Market hopes of rate hikes from the BoJ have pinned into the high side, and uncorroborated reports from the Nikkei news service in Japan insist that the BoJ has already agreed internally to raise interest rates to a 0.0-0.1% range. Japan’s main reference rate is currently near -0.1%. The BoJ is expected to drop its latest rate call sometime early Tuesday.

The Fed will hit markets with its latest rate call on Wednesday, to be followed by another press conference from Fed Chairman Jerome Powell. The Fed will also update its Dot Plot summary of interest rate projections. Rate-cut-hungry markets are increasingly worried the Fed is going to ease back on rate cut expectations. The Fed’s last Dot Plot suggested a median forecast of three rate cuts through 2024, totaling around 75 basis points in rate slashing by the end of the year. Money markets entered 2024 expecting a whopping six or seven rate cuts totaling an eye-watering 175-200 basis points.

As the US economy proves far more resilient than rate watchers expected, and US inflation remains stickier than hoped, rate futures markets have been knocked firmly back, with rate expectations falling to match the Fed’s own Dot Plot in March. According to the CME’s FedWatch Tool, markets were pricing in nearly 70% odds of a first rate cut from the Fed in June as recently as last week. That number has eased to around 50-50 odds on Monday.

US Purchasing Manager Index (PMI) figures are due in the back half of the trading week, as well as Japanese Trade Balance numbers on Thursday followed by Japanese National Consumer Price Index (CPI) follow-up inflation numbers early Friday.

USD/JPY technical outlook

USD/JPY is broadly flat on Monday, testing the waters just north of the 149.00 handle. The pair pushed into the north side of a descending 200-hour Simple Moving Average (SMA) last week, which is settling into the 148.00 region. 151.00 remains a key technical ceiling in the near term, and intraday momentum remains in the hands of the bulls with the pair bouncing into a recovery from 146.50.

USD/JPY hourly chart

The Bank of Japan’s hike or hold decision is a 50-50 affair. Economists at ING analyze how the BoJ policy announcement could impact the Japanese Yen (JPY).

The Yen still needs help from USD rates

• USD/JPY clings to gains above 149.00 as the BoJ seems to be delaying plans of exiting an ultra-dovish policy stance.
• Earlier, large hikes awarded by Japanese firms and stable inflation above 2% boosted BoJ’s rate hike hopes.
• The US Dollar trades sideways as the focus shifts to Fed policy.

The USD/JPY pair exhibits strength above the crucial support of 149.00 in the early New York session. The asset clings to gains as market expectations for the Bank of Japan (BoJ) delaying its plans to exit negative interest rates and scrap Yield Curve Control (YCC) have escalated.

Big Japanese firms have rewarded historic wage growth, and inflation has remained sticky above the desired target of 2%, providing confidence to BoJ policymakers to put an end to the expansionary interest rate stance.

The factor that is limiting hopes for BoJ's increasing interest rates is the absence of a catalyst, which could ensure a wage-price spiral. Investors seem confident that the BoJ will end its ultra-loose policy stance in April by raising interest rates from negative 0.1% to 0.1%.

Meanwhile, the market sentiment improves on upbeat China’s Retail Sales and Industrial Production data for February. Higher than anticipated China’s exhibit a strong recovery in its domestic economy. S&P500 futures have generated significant gains in the European session, portraying an improvement in the risk appetite of the market participants.

The US Dollar Index (DXY) trades sideways around 103.40 as investors shift focus to the Federal Reserve's (Fed) interest rate decision, which will be announced on Wednesday. The Fed is expected to keep interest rates unchanged in the range of 5.25%- 5.50%. Investors will focus on the dot plot that presents policymakers’ projections for interest rates over time and economic projections.

Economists at TD Securities discuss the Bank of Japan (BoJ) Interest Rate Decision and their implications for the USD/JPY pair.

On Hold – Dovish (10%)

On Hold – Hawkish (10%)

Base Case: 10 bps hike – Measured tone (60%)

Hike – Hawkish (5%)

Speculation around a BoJ monetary policy shift has been building. Economists at TD Securities bring forward their call for an April hike to March.

BoJ to hike next week