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In the latest update, Japanese Yen Approaches 150 mark as US Dollar Gains Traction, aligned with Potential BoJ Intervention.
with financial markets maintaining a vigilant stance in anticipation of potential intervention from the Bank of Japan (BoJ) should the Yen undergo a rapid depreciation.
The US Dollar has exhibited a noteworthy ascent against major global currencies over the course of the current week.
This surge in the value of the US Dollar has been attributed to the marked increase in Treasury yields, particularly in the long-term maturity segment of the yield curve.
This upward movement in yields has led to a noticeable flattening of the closely monitored 2s 10s yield curve.
This a phenomenon referred to as “bear steepening,” reflective of the diminishing value of the 10-year bond as its yield escalates.
Simultaneously, yields on Japanese Government Bonds (JGBs) have displayed an upward trajectory. Meaning testing the boundaries within which the BoJ is willing to exercise yield curve control.
The 10-year JGB yields approached 0.86% overnight and have since remained at similar levels as the trading session unfolds, marking the highest yield for this category of bonds since 2013.
In parallel, the 10-year US Treasury note surpassed the 5.00% threshold yesterday, outpacing the growth in JGB yields.
This development has the potential to provide further support to the USD/JPY exchange rate.
Market reaction upon Japanese Yen Approaches 150 Mark fact
Bank of Japan scheduled on 31 of October a monetary policy meeting after Japanese Yen Approaches 150 Mark
This announcement generated market speculation regarding potential policy tightening.
That is pertinent to note that the BoJ currently maintains a policy rate of -0.10%.
It also employs yield curve control by targeting a non-specific range near zero for Japanese Government Bonds.
It is right to mention this comes with maturities extending up to 10 years.
Previously, this range was set at +/- 0.50% before the bank introduced a degree of flexibility.
Many participants in the financial markets are closely monitoring the possibility of a shift in YCC.
However, there is also keen interest in a potential revision of the zero interest rate policy.
This interest comes particularly following comments by former BoJ board member Makoto Sakurai made on Thursday.
Sakurai expressed his belief that the bank is more likely to discontinue the negative interest rate policy.
Mentioning that will happens before considering any further alterations to YCC.
Also Read: Dollar Surges to 10-Month High Amid Soaring US Yields; Yen Slides
In fact, he had previously mentioned that the bank might loosen YCC controls several months ahead of any adjustments to the policy.
In any event, the differential in yields appears to be providing support for the USD/JPY exchange rate at present.
Nonetheless, an underlying question pertains to the likelihood of the BoJ engaging in USD/JPY selling should the exchange rate ascend further.
USD/JPY Technical Analysis Update
The USD/JPY exchange rate is gradually approaching the 12-month high recorded earlier this month as Japanese Yen Approaches 150 Mark.
A break beyond this level has the potential to propel the exchange rate towards the 33-year peak observed around the same period last year at 151.95.
A bullish triple moving average (TMA) formation necessitates the price to remain consistently above the short-term SMA.
This in turn should maintain a position above the medium-term SMA.
wile the medium-term SMA should exhibit a positive gradient above the long-term SMA.
This configuration is consistently met across various combinations of the 10-, 21-, 34-, 55-, 100-, and 200-day SMAs, indicating the emergence of a bullish momentum. Further insights into trend trading can be found in the accompanying banner below.
Disclaimer:
Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
