The US Dollar to Japanese Yen (USD/JPY) exchange rate concluded last week lower, giving up its gains as foreign exchange markets gave up on Fed rate hike bets. This Thursday will prove extremely volatile as Bank of Japan and US Federal Reserve's meetings adead.
Even after Monday’s better-than-expected US housing data the US dollar has remained on the back foot, with market jitters over the imminent Fed meeting increasing.
However, with the outcome of the BoJ policy decision also weighing on the minds of investors the USD/JPY exchange rate has remained on a narrow trend.
USD/JPY began last week at the level of 102.6900, and after falling to a weekly low of 101.5317 on Tuesday the pair briefly peaked at a high of 103.2849 on Wednesday. By the end of the week, the pair had slipped below opening levels again but held above its weekly worst.
Following Friday’s decidedly mixed US data the appeal of the US Dollar has remained generally muted, with investors seeming to discount the prospect of the Fed returning to its tightening cycle this week.
With doubts mounting over the Bank of Japan’s capacity to ease monetary policy further this has seen the USD/JPY exchange rate trending lower on Monday morning.
The US Dollar continued to lose appeal on Monday afternoon as US markets opened to ever-low expectations of a Federal Reserve interest rate hike this week.
As a result, USD/JPY fell back towards its lows after last week’s brief recovery and slipped closer to 101.00. NAHB’s latest housing index score of 65 failed to support the ‘Greenback’.
This week’s session is of course vital to the US Dollar to Japanese Yen exchange rate, but even if the Fed is surprisingly dovish the pair’s losses may be limited as it approaches its psychological resistance low of 100.00.
Today’s live US Dollar exchange rates are displayed below:
On Friday the Japanese Yen to British Pound exchange rate (JPY/GBP) converts at 0.005
The live inter-bank GBP-JPY spot rate is quoted as 194.615 today.
The pound conversion rate (against euro) is quoted at 1.166 EUR/GBP.
The GBP to GBP exchange rate converts at 1 today.
Please note: the FX rates above, updated 26th Apr 2024, will have a commission applied by your typical high street bank. Currency brokers specialise in these type of foreign currency transactions and can save you up to 5% on international payments compared to the banks.
US Dollar (USD) Weakened by Slews of Underwhelming US Data
The US Dollar has ultimately struggled to hold its ground in the past week, as Federal Reserve policy bets take market focus with just a few trade sessions before the bank’s next policy decision.
Markets have been torn on whether the bank will hike up US interest rates in September, and while August’s underwhelming US data has given investors little reason to believe a rate hike is possible, consistently hawkish attitudes from Fed officials have complicated matters.
Regardless, the past week’s data did little to stoke hopes of a Fed rate hike next week, as key US data continued to disappoint. Thursday’s highly anticipated August retail sales score, for example, let down bearish -0.1% forecasts by scoring an even worse -0.3%.
Thursday also included the publication of August’s industrial and manufacturing production scores, which both came in at a worse-than-expected contraction of -0.4%.
Friday’s data helped the Dollar to recover from its downtrend however, as August’s Consumer Price Index (CPI) score beat expectations and scored 0.2% month-on-month and 1.1% year-on-year. This slightly increased Fed rate hike bets and softened the US Dollar’s losses as the week drew to an end.
Japanese Yen (JPY) Exchange Rates Strengthen as Currency Markets Expect Disappointing BoJ Stimulus
Despite mixed Japanese economic data last week, investors began to pile into the ‘safe-haven’ Japanese Yen again towards the end of the week as they awaited next week’s Bank of Japan (BoJ) policy decision meeting.
Investors have been piling into the Yen recently as the typically dovish BoJ has seen something of a shift in tone in recent months, with the previously aggressively easing bank seemingly slowing its easing measures.
Following last month’s surprisingly hawkish BoJ stimulus package, and comments from BoJ Governor Haruhiko Kuroda hinting at a limit to monetary easing, Asian markets now have lower expectations for future BoJ easing.
This has relieved some of the pressure on the already strong Japanese Yen, with the currency strengthening ahead of next week’s meeting on lower stimulus bets.
USD/JPY Forecast: Rates from Fed, Cuts from BoJ?
The US Dollar to Japanese Yen exchange rate could soar in the coming week if central banks take speculated action next week – but the market consensus is that the Federal Reserve will not hike US interest rates and the Bank of Japan (BoJ) will not be as aggressive with easing as they typically are.
With USD investors now focusing on the US Dollar largely due to the hawkishness of Fed officials, the US Dollar could easily plummet if the Fed leaves rates frozen next week as investors seek out better yield opportunities.
The Yen, on the other hand, is likely to strengthen if the BoJ introduces an underwhelming stimulus package as many analysts expect.
However, with key levels of psychological resistance still below USD/JPY’s current levels (such as 100.00) the exchange rate’s potential for loss could be limited unless next week’s US news is particularly disappointing.
Markets are generally hesitant to bring the pair lower than 100.00 USD/JPY due to concerns that the Japanese government will intervene directly in the forex market to prevent the Yen from becoming too overvalued.
USDJPY Trendless
In a note to clients, Shaun Osborne, leading FX strategist at Scotiabank notes the current lack of direction for USD/JPY:
"Signals are neutral and remarkably trendless, and recent congestion has centered around 102."
"Support has been observed around 101.2 with resistance at 103. We await a break of the consolidation range with expectations of a resolution to the downside."
In a note today, Martin O'Rourke of Saxobank highlights the risk of the 100 handle:
"There is a short-term risk of punching lower before going higher" says Saxo's forex chief.
"If we go through 99.50 then we could perhaps test to 95.0 the lows going back to 2012."
"Overall we still prefer the long calls and we don't see USDJPY below 100.00 as sustainable but the best way to look at this might be through options."