Japanese Yen gives back gains against US Dollar, ISM PMI data eyed

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The Japanese Yen (JPY) gives up gains recorded in the early European trade against the US Dollar (USD) during the early North American trading session on Friday. The USD/JPY pair rebounds to near 156.55 after sliding to around 155.50, but is still marginally down.

Japanese Yen falls back against the US Dollar, with the USD/JPY pair rebounding to near 156.55.
Japan’s FM Katayama warned of possible intervention on Thursday.
The Fed is largely expected to keep interest rates at their current levels by the year-end.

In the early European session, a sudden spike was observed in the Japanese Yen, which was expected to be due to possible Japanese intervention in forex markets. However, there had been no official announcement regarding the same.

A stealth intervention by Japan was highly anticipated as Finance Minister (FM) Satsuki Katayama said on Thursday that they are moving closer to taking decisive action in the foreign exchange markets.

Meanwhile, the upside in the USD/JPY pair is expected to be limited as the US Dollar (USD) is broadly underperforming despite expectations that the Federal Reserve (Fed) will not cut interest rates for the entire year.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.16%	-0.08%	-0.05%	-0.11%	0.07%	0.27%	-0.13%
EUR	0.16%		0.08%	0.11%	0.03%	0.25%	0.42%	0.03%
GBP	0.08%	-0.08%		0.02%	-0.03%	0.15%	0.32%	-0.02%
JPY	0.05%	-0.11%	-0.02%		-0.06%	0.12%	0.27%	-0.07%
CAD	0.11%	-0.03%	0.03%	0.06%		0.17%	0.36%	0.00%
AUD	-0.07%	-0.25%	-0.15%	-0.12%	-0.17%		0.18%	-0.16%
NZD	-0.27%	-0.42%	-0.32%	-0.27%	-0.36%	-0.18%		-0.36%
CHF	0.13%	-0.03%	0.02%	0.07%	-0.00%	0.16%	0.36%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

According to the CME FedWatch tool, the odds of the Fed keeping interest rates unchanged in the current range of 3.50%-3.75% by the year end is 83.6%.

In Friday’s session, investors will focus on the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for April, which will be published at 14:00 GMT. The US ISM Manufacturing PMI is expected to come in higher at 53.0 from 52.7 in March.

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.