Get started

Yen

BOJ Navigates Interest Rates and Yen AppreciationThe Japanese yen has appreciated past 130 per dollar and is heading back to its strongest levels in almost eight months. This is mainly due to a general weakness in the dollar, with expectations that the Federal Reserve will slow the pace of its interest rate hikes. The Bank of Japan recently held a policy meeting in January, where policymakers debated the inflation outlook and the likelihood of a sustainable rise in wages, while also emphasizing the need to keep monetary policy accommodative. Despite speculation about another policy adjustment, the central bank maintained its ultra-low interest rates and left its yield control policy unchanged. BOJ Governor Haruhiko Kuroda reemphasized that the 2% inflation target must be achieved in a sustainable manner. Traders will be keeping a close eye on the BOJ's policy meeting in March and April when a new BOJ governor takes office. The yield on the 10-year JGB rose to 0.5%, approaching the upper range of the Bank of Japan's tolerance limit, as investors digest the Summary of Opinions document from the recent policy meeting. This was the highest level since the eight-year peak of 0.506% on January 17th, before the BOJ defied speculation and left its yield curve control policy unchanged at 0.5%. Despite the Summary indicating that the body does not see any changes to the yield curve thresholds in the near future, high inflation adds pressure to drop the ultra-loose policy before a new governor is appointed in April. The Nikkei 225 Index rose 0.07% to close at 27,347 while the broader Topix Index shed 0.15% to 1,972 in mixed trade on Wednesday, with Japanese shares struggling for direction as caution dominated sentiment ahead of a highly-anticipated interest rate decision from the US Federal Reserve. Mixed domestic corporate earnings also weighed on sentiment, as well as lingering uncertainties about new export restrictions in China that may affect Japan’s chip equipment sector. Japanese shares traded mixed on Wednesday, with gains from index heavyweights such as SoftBank Group (1.8%), Tokyo Electron (2.1%) and Nippon Yusen (3.3%), while losses were seen from Mitsubishi UFJ (-0.4%), Sony Group (-1%) and Fast Retailing (-0.6%). Elsewhere, Lasertec plunged 13.8% after missing earnings and revenue estimates in the latest quarter.
Short
by TayFx
Federal Reserve's Recent Interest Rate Hike and its Impact | 2.1The Federal Reserve raised the target range for the federal funds rate by 0.25% to 4.5%–4.75% in its February 2023 meeting. This was a smaller increase than the previous meeting and pushed borrowing costs to the highest level since 2007. Policymakers expect to raise the target range further to reach a restrictive monetary policy that will help bring inflation to 2%. The Fed Chair, Powell, said that the disinflation process has just started and that interest rates are not yet restrictive enough. The dollar index fell 1% after the announcement as investors saw a more dovish tone from the Fed. The future of interest rates will depend on the cumulative impact of monetary policy, economic and financial developments, and the time it takes for monetary policy to affect the economy and inflation. The stock market reacted positively to Powell's comments, with the Dow, S&P 500, and Nasdaq 100 all finishing higher. Companies like Snap, Peloton, and Advanced Micro Devices also had significant changes in their stock prices after reporting earnings. The US Stock Market Index (US30) is expected to be at 32863.60 points at the end of the quarter and 29734.22 in 12 months. The ISM Manufacturing PMI fell to 47.4 in January, the lowest since May 2020 during the height of the COVID-19 pandemic. This indicated a third consecutive contraction in factory activity as companies slowed their output to match demand and prepare for growth in the second half of 2023. Other indicators such as new orders, production, and backlogs of orders also declined, while supplier deliveries and the price index increased. Employment rose slightly, but companies are positive about the future and do not plan to substantially reduce headcounts.
TVC:DXYShort
by TayFx
2
Looking ahead into February 2023 (Yen)Not very long ago, we saw the Yen weaken to historic lows, with the USDJPY climbing to an all-time high of 152. But that was in Oct last year! Since then, the USDJPY is in a strong downward trend. In January, the upside on the USDJPY was capped at the 134.50 price level, with the price generally trading lower, to the key support level of 127.60. The move lower was primarily driven by the weakness of the DXY but volatility was also increased due to 2 key news events from the Bank of Japan (BoJ). 1) On the 12th of January (one week before the BoJ meeting), there was news that the BoJ will review the side effects of its current monetary policy. The BoJ is the only major central bank still adopting an easing monetary policy (negative interest rates, quantitative easing). Therefore, the idea of a review of the monetary policy spurred markets into anticipating the introduction of tightening policies. Because of this, the USDJPY broke strongly below the 131 price level to trade down to 127.60. 2) Price consolidated between 128 and 129 in the lead-up to the BoJ meeting on the 18th of January. The BoJ monetary policy was released with no changes and no mention of a review of the current monetary policy. A major upset to what the market had anticipated. This resulted in the USDJPY immediately spiking strongly to the upside to retest the 131.30 price level. However, the resistance level held strong, with the price retracing back down to the 127.60 price level again. (The USDJPY continues to trade within the range) Where could the Yen head to in February? The good news is, there is no BoJ meeting for the month. This means that it is unlikely that the current monetary policy is less likely to be changed (for now). However, do not rule out the possibility of surprise news releases (like when the BoJ surprised markets by widening the yield target band on the 20th Dec 2022). This also implies that the volatility and next directional bias of the Yen could be dependent on the base pair that it is traded against. Expecting a recovery in strength of the DXY in February, the USDJPY could break out of the current consolidation to climb beyond the 131-round resistance level. However, the anticipation of a review by the BoJ is likely to continue to weigh on the Yen, limiting the potential for significant upside moves. Beyond the 127.60 support level, the next key support level is at the 126 price area. The immediate resistance level is at 131.30 and the next key resistance level above that is 134.50.
by JinDao_Tai
3