Japanese yen under pressure after dismal week

• Fed’s Powell says interest rate hikes still on table

The Japanese yen is drifting on Friday. In the European session, USD/JPY is trading at 151.44, up 0.06%.

It has been a rough week for the Japanese yen, which is down 1.42%, its worst weekly showing since August.

Powell talks hawkish

The markets believe that interest rates have peaked and are looking ahead to rate cuts in 2024, but Fed Chair Powell continues to sound hawkish. Powell said on Thursday that he would not hesitate to raise rates if needed in order to contain inflation and stated that he was “not confident” that inflation would return to 2% under the current policy. The markets still expect a rate cut in mid-2024, but Powell’s remarks led to the markets repricing a cut in July rather than June. It seems that the US economy will have to show much sharper growth before the markets buy into the Fed’s stance that rate hikes remain on the table.

The Japanese yen fell to a one-year low of 151.72 against the dollar on 31 October. Not far off is 151.96, which was last year’s peak and the highest level in some 33 years. With the yen not far from these levels, there is concern that Japan’s Ministry of Finance (MOF) could intervene in the currency markets in order to prop up the ailing yen. The MOF has been jawboning, warning that it is alarmed by the yen’s sharp depreciation. Will this be enough to scare off speculators or will the MOF decide that action is needed to back up tough talk? If the yen continues to lose ground, the possibility of intervention will become more likely.

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USD/JPY Technical

• USD/JPY is putting strong pressure on resistance at 151.56. Above, there is resistance at 152.87
• There is support at 151.12 and 150.51

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