- The Japanese Yen depreciated to 152.25 yen against the US dollar on Wednesday, reaching its lowest level in nearly three months and breaching the psychological barrier of 150 yen against the US dollar, which financial markets fear may prompt Japanese authorities to intervene again in the forex market.
- However, Deputy Chief Cabinet Secretary Yoshihiko Okada declined to comment on currency movements, in contrast to Atsushi Mimura, the top currency diplomat, who affirmed last week that they are closely monitoring foreign exchange rate movements, and that excessive volatility is undesirable.
Japanese authorities had intervened in the currency markets earlier this year when the Yen breached the 160-yen level against the US dollar, with markets watching the 150-yen level as a potential new line in the sand.
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According to forex market trading, the Japanese Yen began to weaken in mid-September due to increasing uncertainty about the path of interest rate hikes at the Bank of Japan. The local currency also came under pressure from the rising US dollar, which benefited from strong US economic data and increased odds of a Trump presidency again.
Overall, the US dollar has maintained its gains thanks to strong Treasury yields. The US Dollar Index traded slightly below the 104 marks on Tuesday, remaining at its strongest levels since early August, tracking the rise in Treasury yields amid strong US economic expectations and increased odds of a Trump presidency again.
A series of economic data on the Labor market, consumer inflation, and retail sales had indicated that the economy remains resilient, reducing the need for aggressive interest rate cuts by the Federal Reserve.
Given the series of strong US economic data, Minneapolis Federal Reserve President Neel Kashkari said the long-term path for interest rates may be higher than in the past. Dallas Federal Reserve President Lorie Logan also supported rate cuts but called for a patient approach.
Meanwhile, the so-called "Trump trade" has further boosted the US dollar as the former president's tariff and tax policies are seen as inflationary. Investors are now looking forward to the release of preliminary Purchasing Managers' Index data on Thursday, which will provide an updated view of the private sector's performance in October.
According to the performance on the daily chart, the USD/JPY bullish trend is strengthening. As we mentioned before, a break of the psychological resistance of 150.00 will strengthen the bulls’ control over the trend and herald a stronger upward move with higher gains than the resistance of 152.25. furthermore, technical indicators are moving towards strong overbought levels. I expect the general trend of USD/JPY to remain bullish until the results of the US presidential elections early next month.
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