USD/JPY – Yen steady as markets remain jittery

The Japanese yen has started the trading week quietly. In the North American session, USD/JPY is trading at 131.67, down 0.14%.

The markets are coming off a week of turmoil, as the banking crisis threatens to spread. Over the weekend, there were positive developments, as the Swiss government and major central banks did their bit to try and calm things down. The Swiss government devised an emergency takeover of Credit Suisse by rival UBS. The move failed to prop up Credit Suisse shares, which have plummeted 54% today. UBS shares were down earlier but have recovered.

Yen racks up huge gains in market turmoil

As well, six central banks, including the Federal Reserve and the Bank of Japan announced a joint move to boost US dollar liquidity. Investors are still jittery about the banking system after the collapse of the Silicon Valley and Signature banks. The First Republic Bank received a $30 billion injection from some major US banks, yet still saw its shares slide 15% today, after falling 80% earlier this month.

The bank crisis has centered on failing banks in the US and Switzerland, which has investors thinking twice about buying US dollars or Swiss francs. That has left the Japanese yen as the safe-haven currency of choice. The yen made the most of the market mayhem and climbed 2.2% last week. Earlier today, USD/JPY touched a low of 130.54, its lowest level since February 10.

In the midst of this financial crisis, the Federal Reserve meets Wednesday. The Fed will have to be cautious moving forward, but the markets are still expecting a 25 basis point hike on Wednesday, with an outside chance of a pause. The Fed wants to continue raising rates in order to contain inflation, and Fed Chair Powell’s testimony on the Hill earlier in March was hawkish and convinced the markets to price in a 50-basis point move. That has quickly changed with the financial markets in turmoil, and investors are again talking about rate cuts later in the year, with a terminal rate forecast of 4.25%, compared to the current level of 4.50%.

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USD/JPY Technical

• There is resistance at 132.85 and 134.15
• 130.60 and 129.30 are providing support

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