Japanese yen’s rally continues

The Japanese yen is in positive territory on the first trading day of the new year. US and Japan markets are both closed today, and the yen will likely continue to remain calm in holiday-thinned trading. Currently, USD/JPY is trading at 130.65, down 0.34%.

Markets keep an eye on BoJ

There are no tier-1 events out of Japan this week, but investors will be nevertheless keeping a close eye on the surging Japanese yen. The currency had a long slide for most of 2022 and fell below 151 in October, its lowest level in 24 years. This forced the Ministry of Finance to intervene in the currency markets. The yen has made a remarkable comeback since then, rising about 11%. The Bank of Japan shocked the markets in December when it widened the yield curve band from 0.25% to 0.50%. The move sent the yen sharply higher and has raised speculation that the Bank of Japan could be planning to exit its massive stimulus programme, although the BoJ has denied it has any such plans. The Bank of Japan holds its next meeting on January 18^th.

What made the BoJ move so dramatic is that the markets were expecting the BoJ to remain in cruise control until BoJ Governor Kuroda’s term ends in April, after a decade at the helm of the central bank. BoJ policy could well change, depending on the new governor, but Kuroda has demonstrated that he is not shy about making policy moves at the end of his term and the markets will watching for further measures which could shake up the Japanese yen.

The yen may have bounced back over the past two months, but USD/JPY has still gained 13.7% in 2022, which is the yen’s worst performance since 2013. The driver behind the yen’s descent was the BoJ’s ultra-loose policy, which capped 10-year yields at 0.25%, contributing to a constantly widening US/Japan rate differential. The BoJ’s tweak which widened the yield curve band to 0.50% has given the yen a boost, but we’ll have to wait to see if the yen can hold onto these recent gains.

.

USD/JPY Technical

• USD/JPY faces resistance at 131.66 and 132.55
• There is support at 129.76 and 128.41

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.