Market Data 
- The Japanese Yen fails to capitalize on the hawkish BoJ minutes-led modest gains.
- The BoJ rate-hike uncertainty and the risk-on impulse weigh heavily on the JPY.
- The US election results trigger a sharp USD rally and push the USD/JPY pair higher.
The Japanese Yen (JPY) touches a two-week high against its American counterpart during the Asian session on Wednesday after Bank of Japan (BoJ) minutes showed that the central bank will continue to hike interest rates if economic and price forecasts meet. Investors, however, seem convinced that Japan’s political landscape could make it difficult for the BoJ to tighten its monetary policy further. Apart from this, a generally positive risk tone undermines the safe-haven JPY.
This, along with the emergence of strong US Dollar (USD) buying, bolstered by initial exit polls showing that the scale leans toward former President Donald Trump, triggers a goodish intraday recovery of nearly 150 pips for the USD/JPY pair. As polls continue to hit the wires, markets are expected to react sharply one way or the other. This, in turn, warrants some caution for aggressive traders and before positioning for a firm near-term direction for the currency pair.
Daily Digest Market Movers: Japanese Yen is pressured by resurgent USD demand
- The minutes of the September Bank of Japan policy meeting showed that the central bank plans gradual policy rate increases, though it remains cautious about overseas economic uncertainties, especially from the US.
- This comes on top of BoJ Governor Kazuo Ueda’s hawkish remarks last week and keeps the door open for additional rate hikes, which, in turn, provides a modest lift to the Japanese Yen during the Asian session.
- The initial market reaction, however, turns out to be short-lived and fades rather quickly amid doubts over the BoJ’s ability to tighten its monetary policy further in the wake of the political uncertainty in Japan.
- The US Dollar rallies across the board after exit polls indicate an early lead in Georgia (swing state) for the Republican nominee Donald Trump, triggering a sharp surge of nearly 150 pips for the USD/JPY pair.
- Rising odds of Trump winning the election fuel speculations about the launch of potentially inflation-generating tariffs, which, along with deficit-spending concerns, push the US Treasury bond yields sharply higher.
- The yield on the benchmark 10-year US government bond spikes to its highest level since July, contributing to the strong bid tone surrounding the USD and driving flows away from the lower-yielding JPY.
Technical Outlook: USD/JPY could aim to challenge the multi-month top, around 153.85-153.90 area
From a technical perspective, sustained strength beyond the 153.00 round figure could lift the USD/JPY pair to the 153.35-153.40 supply zone en route to the 153.85-153.90 region, or a three-month peak touched last week. Some follow-through buying will be seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart are holding in the positive territory, spot prices might then climb to the next relevant hurdle near the 154.60-154.70 area before aiming to reclaim the 155.00 psychological mark.
On the flip side, the 152.30 area now seems to protect the immediate downside ahead of the 152.00 mark and the Asian session low, around the 151.30-151.25 region. This is followed by the 151.00 round figure, below which the USD/JPY pair could slide towards the 100-day Simple Moving Average (SMA) resistance breakpoint, now turned support, around the 150.25 region. Some follow-through selling, leading to a break below the 150.00 psychological mark, will shift the near-term bias in favor of bearish traders and pave the way for deeper losses.
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 BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, 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 supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
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.
