The Japanese Yen (JPY) touched a one-week low around the 151.00 mark against the US Dollar during the Asian session on Monday, highlighting ongoing currency fluctuations amidst shifting monetary policies. The Bank of Japan's (BoJ) ultra-loose monetary policy from 2013 to 2024 has led to the Yen's depreciation against major currencies. This policy divergence between the BoJ and other central banks has been a significant factor in the Yen's performance.
Recent economic data from Japan revealed robust growth and persistent inflation, reinforcing expectations that the BoJ may continue to hike interest rates. This development lends support to the Japanese Yen, often considered a safe-haven investment by global investors. The BoJ's approach contrasts with major central banks' interest rate cuts, narrowing the yield differential between US and Japanese bonds.
In the US, the core Personal Consumption Expenditures (PCE) Price Index, excluding food and energy prices, rose by 2.6% year-on-year in the reported month, down from 2.9% in December. This data added pressure on the USD/JPY pair, as the US Dollar struggled to capitalize on its recent gains following strong inflation data.
The BoJ has occasionally intervened in currency markets to lower the Yen's value, though these interventions are infrequent due to political concerns with its trading partners. Governor Kazuo Ueda emphasized caution regarding US President Donald Trump's tariff plans and their potential impact on global economic conditions, suggesting vigilance in monetary policy settings.
The momentum for the Yen could extend towards the crucial 200-day Simple Moving Average (SMA), presently near the 152.40 region. The decision by the BoJ in 2024 to gradually abandon its ultra-loose policy, alongside interest rate reductions by other central banks, is reducing the yield gap between US and Japanese 10-year bonds.
As one of the world's most traded currencies, the Yen's role in global finance remains significant. Uncertainty surrounding the ongoing conflict between Russia and Ukraine continues to bolster safe-haven assets and contributes to renewed pressure on the US Dollar.
Japanese media reports indicate potential pressure on the BoJ from the US administration if it perceives that Yen weakness stems from Japan's central bank policies. The BoJ's mandate includes currency control, making its decisions pivotal for the Yen's valuation.