07.02.2023 10:36 AM
USD/JPY is doing fine again

This image is no longer relevant

Not so long ago USD/JPY was near death. But at the end of last week, the major recovered and started to impress. Now most analysts see its potential for further growth.

The dollar has the wind at its back

Last year, USD/JPY was the best major pair as the monetary paths of the Federal Reserve and Bank of Japan diverged significantly. The former took a hawkish route, while the latter stayed dovish.

The balance of forces only changed at the end of last year, when there were fears in the market that the gap in interest rates between the US and Japan would begin to shrink.

Speculation on this topic did not emerge out of nothing: In December, the Fed slowed the pace of rate hikes, and the BOJ adjusted its yield curve control policy for the first time in many years, which was interpreted by the market as a hawkish move.

Against this backdrop, the dollar fell noticeably against its Japanese counterpart. But over the last few days, the greenback felt the rush of strength again.

Since the end of last week, the pair has been demonstrating growth. On Friday, the quote jumped by almost 2%, and yesterday it strengthened by more than 1%.

This image is no longer relevant

The catalyst was conformity formed in the market. In the light of the latest news, investors have reconsidered their views on the Fed and BOJ's policies.

Now most market participants are inclined to believe that in the near future, the monetary divergence between the US and Japan will continue to grow.

After last week's strong U.S. employment report, traders increased bets that the Fed will raise rates at least twice more this year.

"Friday's NFP (nonfarm payroll) number solidified the likelihood of another 25 basis points hike and reduced the chances of an eventual rate cut at the end of the year, sending equities lower and the greenback soaring," said John Doyle, vice president of operations and trading at Monex USA.

At this stage, investors expect the index to reach a high of 5.1% by July, which is higher than their previous estimate of less than 5%.

The strengthening of hawkish market expectations contributed to a broad-based uptrend in the U.S. currency. On Monday, the dollar index soared to a nearly one-month high of 103.76.

The yen took a punch

The dollar has been hit on many fronts in the last two sessions, but it showed the best values, like in the good old days, against the Japanese currency.

At the start of the week, the yen fell on the back of a report that BOJ Deputy Governor Masayoshi Amamiya was being sounded out to be the next governor.

Recall that current BOJ Governor Haruhiko Kuroda's term of office is set to end in April. Presumably this week the national government should name his successor.

Several candidates are running for the position, including politicians who have previously voiced a hawkish course.

Yen bulls have high hopes for them, but it seems that these dreams are not destined to come true. Yesterday, Japan's Nikkei reported that the Japanese government has approached Amamiya for the role. He has a reputation as Kuroda's right-hand man and is considered the most dovish among the contenders.

Members of the government denied the information, but it could not save the Japanese currency from falling. On Monday, JPY fell to a one-month low of 132.90.

Given Japan's long-standing commitment to an ultra-loose course, many market participants now estimate that Amamiya's dovish course is the most plausible scenario.

At the same time, most analysts are confident that this official, once at the helm, will take the path of least resistance - maintaining the policies initiated by his predecessor.

"I don't think the BOJ will reverse monetary policy," said Tina Teng, market analyst at CMC Markets. "There are still economic concerns, there are still recessionary risks."

Many experts think that Amamiya's nomination as the head of BOJ will lead to further weakening of the Japanese currency against the dollar.

However, if the government nominates another name it might give a strong impulse to the yen, and then the USD/JPY is likely to drop below the key level of 130.


Today, the focus is on the Japanese wage growth data.

Previously, the BOJ has repeatedly stressed that a high figure accompanied by solid inflation is a crucial condition for the country to roll back accommodative policies.

Statistics released this morning showed that real wages in Japan rose an annualized 0.1% in December. This is the first increase in nine months.

Meanwhile, nominal wages also showed a positive trend, rising 4.8% year-over-year. This is the fastest increase in 26 years.

The yen appreciated slightly against the dollar on positive data. At the time of writing, the pair was down 0.4% to 132.11.

The Japanese currency was also supported by Japanese Finance Minister Shunichi Suzuki's statements in the morning. The official confirmed that last year, the Japanese government intervened in the foreign exchange market to support the yen.

These were interventions on October 21 and 24, which have yet to be confirmed. The Japanese government spent 5.6 trillion yen ($42.2 billion) and 729.6 billion yen on the respective days to prop up the yen, which hit a 32-year low against the dollar.

So last year, Japan had a total of three interventions. The fact that the authorities decided to talk about the two of them now that the yen is in free-fall again is hardly a coincidence, and traders, of course, better keep their eyes open.

But let's get emotion out of the way and think logically: is renewed talk of intervention really going to support the yen at this point? Probably not.

The Japanese authorities spent a long time threatening speculators with intervention and decided to take this measure only when JPY crossed the so-called red line, which was above 150. Right now the yen is trading around 132, which is way below the critical level.

The Japanese currency is still far from reaching the bottom but it looks like it will continue to fall in the coming days. In particular, the yen might be pressured today by the speech of Fed Chairman Jerome Powell.

Traders expect Powell to shed light on the further trajectory of interest rate hikes in the US. At the same time, most market participants are inclined to believe that the Fed will remain hawkish. If Powell does not disappoint investors, the dollar will get another strong boost to the upside.

Аlena Ivannitskaya,
Analytical expert of InstaForex
© 2007-2023
US Dollar vs Japanese Yen
Select timeframe
Start trade
Start trade
  • Grand Choice
    Contest by
    InstaForex always strives to help you
    fulfill your biggest dreams.
  • Chancy Deposit
    Deposit your account with $3,000 and get $8000 more!
    In March we raffle $8000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
  • 30% Bonus
    Receive a 30% bonus every time you top up your account

Recommended Stories

US stock market closed lower, Dow Jones down 0.12%

At the close in the New York Stock Exchange, the Dow Jones fell 0.12%, the S&P 500 index fell 0.16%, the NASDAQ Composite index fell 0.45%. The attention of traders

Thomas Frank 04:22 2023-03-29 UTC+2

Is the euro missile a short flight? Perhaps it will fall soon

The European currency has made a significant leap, taking advantage of some of the dollar's confusion. The latter has repeatedly recovered from its falls, but now it's losing

Larisa Kolesnikova 09:09 2023-03-28 UTC+2

EUR struggles to go bullish against USD

On Friday, the single European currency fell by almost 0.7% against its American counterpart to 1.0760. The EUR/USD pair closed in the red zone for the second

Viktor Isakov 09:01 2023-03-28 UTC+2

US stock market closed mixed, Dow Jones up 0.60%

The US stock market ended trading on Monday in different directions due to the strengthening of the sectors of oil and gas, finance and telecommunications. The market demonstrates against

Thomas Frank 04:32 2023-03-28 UTC+2

Gold is getting cheaper, but there are plenty of growth factors

Gold prices fell on Monday morning, although before that it rose steadily for 4 straight weeks. As of 07:00 London time, US gold futures fell 0.11% to $1,989 per ounce

Natalia Andreeva 23:54 2023-03-27 UTC+2

EUR/USD: they tried to defeat the dollar, but the banking system almost collapsed

The US currency started the new week relatively positive, trying to keep the delicate balance gained at the end of last week. The recent disruption in the global banking system

Larisa Kolesnikova 09:28 2023-03-27 UTC+2

GBP/USD. Pound forecast after the Fed and Bank of England meeting

The British pound fell below 1.2200 against the dollar while maintaining its weekly gain. Traders were analyzing the latest event. What will be the key factor in the GBP/USD movement

Anna Zotova 16:40 2023-03-26 UTC+2

USD/JPY hit by pessimism

USD/JPY continues to slide down, hitting the 1.5-month low of 130.2 early on Friday. Analysts warn that the US dollar's losing streak could continue for quite some time

Аlena Ivannitskaya 09:34 2023-03-24 UTC+2

Asian stocks mostly negative

On Wednesday, the US central bank held a two-day meeting and this had an impact on all world stock indices. Major Asian stock markets fell for the most part

22:38 2023-03-23 UTC+2

The pound's "smile" is the opposite of the dollar's smirk. GBP on the rise

The British currency experienced a stellar hour at one point, surging after rising consumer inflation in the UK and the Fed's decision on the key rate. However, experts fear that

Larisa Kolesnikova 09:28 2023-03-23 UTC+2
提出您的问题,用 在线帮助.