USD/JPY plunges on another possible ‘Yentervention’ alongside cooling US CPI inflation
-
USD/JPY
plummeted
2.6%
top-to-bottom
after
US
CPI
inflation
eased
in
June. -
Strong
signs
of
direct
market
invention
in
Yen
markets,
but
no
confirmation. -
Market
anticipation
for
a
September
Fed
rate
cut
is
pinned
to
the
ceiling.
USD/JPY
plummeted
on
Thursday,
declining
2.6%
in
a
sharp
reaction
to
cooling
US
Consumer
Price
Index
(CPI)
inflation
and
a
broadly
suspected
“Yentervention”
by
the
Bank
of
Japan
(BoJ)
to
prop
up
the
floundering
JPY.
June’s
US
CPI
inflation
broadly
fell
below
forecasts,
with
annualized
headline
CPI
inflation
easing
to
3.0%
YoY
from
the
previous
3.3%
and
falling
even
lower
than
the
forecast
3.1%.
CPI
inflation
actually
contracted
-0.1%
MoM
in
June,
falling
back
from
the
previous
month’s
flat
0.0%
and
below
the
forecast
0.1%.
US
Initial
Jobless
Claims
fell
to
222K
for
the
week
ended
July
5,
down
from
the
previous
week’s
revised
239K
and
improving
from
the
forecast
236K.
Thursday’s
Initial
Jobless
Claims
figure
helped
to
push
the
four-week
average
down
to
233.5K
from
the
previous
238.75K.
With
US
CPI
inflation
cooling
at
an
accelerated
pace,
market
expectations
for
a
rate
hike
from
the
Federal
Reserve
(Fed)
are
pricing
in
the
possibility
of
three
quarter-point
rate
cuts
in
2024.
According
to
the
CME’s
FedWatch
Tool,
rate
market
bets
of
a
September
rate
cut
have
soared
to
95%.
According
to
unconfirmed
rumors
citing
unnamed
officials
within
the
Japanese
government,
a
‘Yentervention’
was
timed
with
the
release
of
US
CPI
inflation
figures,
sending
the
Yen
broadly
higher
across
the
board
on
Thursday.
In
a
repeat
of
previous
Yenterventions,
any
official
confirmation
or
denial
is
unlikely
to
come
from
BoJ
or
Ministry
of
Finance
officials
for
several
weeks.
USD/JPY
technical
outlook
USD/JPY
took
a
steep
dive
on
Thursday,
briefly
testing
below
the
50-day
Exponential
Moving
Average
(EMA)
at
157.97
before
a
half-hearted
recovery.
The
pair
is
still
sharply
down
from
the
day’s
opening
bids,
but
a
long-running
bull
trend
that
has
dragged
USD/JPY
to
multi-decade
highs
has
left
the
pair
buried
deep
in
bull
country.
USD/JPY
is
still
trading
well
above
the
200-day
EMA
at
151.81,
and
Thursday’s
bearish
plunge
is
unlikely
to
cause
a
meaningful
shift
in
the
long-term
trend.
USD/JPY
daily
chart
Japanese
Yen
FAQs
The
Japanese
Yen
(JPY)
is
one
of
the
world’s
most
traded
currencies.
Its
value
is
broadly
determined
by
the
performance
of
the
Japanese
economy,
but
more
specifically
by
the
Bank
of
Japan’s
policy,
the
differential
between
Japanese
and
US
bond
yields,
or
risk
sentiment
among
traders,
among
other
factors.
One
of
the
Bank
of
Japan’s
mandates
is
currency
control,
so
its
moves
are
key
for
the
Yen.
The
BoJ
has
directly
intervened
in
currency
markets
sometimes,
generally
to
lower
the
value
of
the
Yen,
although
it
refrains
from
doing
it
often
due
to
political
concerns
of
its
main
trading
partners.
The
current
BoJ
ultra-loose
monetary
policy,
based
on
massive
stimulus
to
the
economy,
has
caused
the
Yen
to
depreciate
against
its
main
currency
peers.
This
process
has
exacerbated
more
recently
due
to
an
increasing
policy
divergence
between
the
Bank
of
Japan
and
other
main
central
banks,
which
have
opted
to
increase
interest
rates
sharply
to
fight
decades-high
levels
of
inflation.
The
BoJ’s
stance
of
sticking
to
ultra-loose
monetary
policy
has
led
to
a
widening
policy
divergence
with
other
central
banks,
particularly
with
the
US
Federal
Reserve.
This
supports
a
widening
of
the
differential
between
the
10-year
US
and
Japanese
bonds,
which
favors
the
US
Dollar
against
the
Japanese
Yen.
The
Japanese
Yen
is
often
seen
as
a
safe-haven
investment.
This
means
that
in
times
of
market
stress,
investors
are
more
likely
to
put
their
money
in
the
Japanese
currency
due
to
its
supposed
reliability
and
stability.
Turbulent
times
are
likely
to
strengthen
the
Yen’s
value
against
other
currencies
seen
as
more
risky
to
invest
in.
Leave a Reply