Yen slides as BoJ dampens rate hike hopes

The Japanese yen’s rally came to crashing halt on Wednesday. USD/JPY has jumped 2.1%, trading at 147.41 in the North American session at the time of writing.

BoJ deputy governor says no hikes during market unrest

The Japanese yen has been on a tear, rising a massive 10.7% since July 11, prior to today. The rally was stopped in its tracks today after BoJ deputy governor Shinichi Uchida stated that the Bank of Japan would not raise interest rates when markets are unstable.

That remark sent the yen on a nasty spill, as investors viewed Uchida’s comment as a signal that the BoJ would not raise rates in the near term. The Japanese currency has been a roller-coaster, as the yen shot higher after the BoJ unexpectedly raised interest rates from between 0% and 0.05% to 0.25%.

Uchida’s comments contrasted sharply with Governor Ueda’s remarks at last week’s meeting. Ueda said that the BoJ would continue to rates if the economy and prices move along the Bank’s forecasts, adding that rates could rise higher than 0.5%.

Governor Ueda may have the last word when it comes to monetary policy and the central is expected to continue tightening, but the yen’s sharp drop today reflects nervous investors who are hanging on every word coming out of the Bank of Japan.

Investors are expecting a strong response from the Federal Reserve in the face of recent signs that the US economy is quickly deteriorating, such as the soft nonfarm payrolls for July. The fears of the US economy tipping into a recession routed the global markets early in the week. The panic has eased and the markets have partially rebounded, but investors remain jittery that the sell-off may not be over.
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USD/JPY Technical

• USD/JPY pushed above several resistance lines today and tested resistance at 147.53. Above, there is resistance at 148.69.
• 143.21 and 142.05 are providing support

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