Japanese Yen extends range play around 158.00 vs USD as intervention risks limit losses

USD/JPY edges higher during the Asian session, though it remains confined in a familiar range.
The BoJ’s cautious stance and the wide US-Japan rate gap weigh on the JPY, supporting the pair.
Intervention risks help limit JPY losses while the recent fall in US bond yields undermines the USD.

The USD/JPY pair reverses a modest Asian session dip on Monday and climbs back above the 158.00 mark in the last hour, though it remains confined in a familiar range.

Traders are holding back from placing fresh direction bets ahead of key central bank events – the highly anticipated US Federal Reserve’s (Fed) decision on October 28, followed by the Bank of Japan (BoJ) meeting on October 29–30. In the meantime, the wide US-Japan yield differential and the BoJ's cautious stance keep Japanese Yen (JPY) bulls on the defensive, acting as a tailwind for the USD/JPY pair.

Análisis de TMGM: noticias de mercados financieros, calendario económico e información del mercado

In fact, media reports suggested last week that BoJ officials see little need for a rare back-to-back interest rate hike in the absence of signs that upside inflation risks will increase abruptly. Furthermore, the US Dollar (USD) is seen moving away from a two-week low, touched on Friday, amid escalating tensions in the Middle East, and this turns out to be another factor offering some support to the USD/JPY pair.

In the latest development, Iran’s Islamic Revolutionary Guard Corps (IRGC) said on Sunday that an oil tanker caught fire and exploded after striking a naval mine in the Strait of Hormuz. Moreover, a secretary of Iran’s Supreme National Security Council, Mohsen Rezaei, warned that Tehran has prepared a new retaliation plan for any renewed US-Israeli attack, keeping the geopolitical risk premium in play.

However, the recent sharp retracement slide in US government bond yields from multi-year highs and Fed Chair Kevin Warsh’s unwillingness to provide any signals on further policy moves might cap the USD. Furthermore, traders remain on high alert amid speculation that Japanese authorities will step in again to prop up the domestic currency, which might contribute to capping gains for the USD/JPY pair.

Meanwhile, BoJ Governor Kazuo Ueda said this Monday that if the policy rate isn't adjusted properly, market concerns about inflation risk could raise long-term rates. Ueda added that Japan is experiencing a positive loop of increasing wages and recovering prices, while underlying inflation remains near the 2% target. This warrants caution before placing fresh bullish bets on the USD/JPY pair.

USD/JPY 4-hour chart

Technical Analysis

The USD/JPY pair hovers around the 100-period Simple Moving Average (SMA) on the 4-hour chart, keeping the range play intact. However, a move beyond the top boundary of the trading range, around 158.75 region, would back the case for additional gains. On the flip side, immediate support is located at the lower boundary of the range 157.60. A clear break below this area would weaken the current bullish tone and open the door to a deeper correction on the four-hour timeframe.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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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