Japanese Yen gathers strength as Japan intervened in FX market again

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The USD/JPY pair loses ground to around 156.85 during the Asian session on Friday. The Japanese Yen (JPY) strengthens against the US Dollar (USD) following another intervention by Japanese authorities. Markets might turn cautious later on Friday ahead of the US April employment report.

USD/JPY edges lower to near 156.85 in Friday’s Asian session.
Japanese authorities intervened in the FX market again during the May holidays.
The US April employment report will be the highlight on Friday.

Reuters reported on Friday, citing a source familiar with the matter, that Japan’s officials intervened in the foreign exchange market during holidays in early May after having conducted Japanese yen-buying operations on April 30. The source said: “The intervention since the start of May was timed to coincide with the holiday period, when market liquidity was thin.”

The potential for further interventions could provide some support to the JPY and act as a headwind for the pair. Japan’s top foreign exchange official Atsushi Mimura said on Thursday that authorities are prepared to respond on all fronts to speculative moves in the foreign exchange market.

All eyes will be on the US employment report for April, which is due on Friday. Market consensus estimates 62,000 new jobs in April. This would be a sharp drop from the 178,000 jobs added in March. Furthermore, the Unemployment Rate is projected to remain steady at 4.3%.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

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