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USD/JPY spikes to 24-year highs

This morning, the US dollar surged to a 24 year high against the Japanese yen as the country's top currency diplomat expressed concern about recent yen moves.

The Yen continued to plunge on Thursday, despite several verbal warnings by Japanese officials, with the USD/JPY pair settling above 144 for now, the highest level since 1998.

More volatility to come

Market investors will pay careful attention to FOMC Chairman Jerome Powell’s address later today as the Fed gets ready to enter the blackout period on Saturday.

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Additionally, the Fed released the Beige Book Wednesday, an analysis of the state of the economy based on information from 12 district banks. The report revealed that price rises have moderated in nine of the twelve districts, but most of those polled anticipate price pressures to continue until the end of the year.

Verbal interventions mount

According to Reuters, Japan’s top currency diplomat Kanda said on Thursday that recent quick yen swings have been speculative and one-sided.

“Government and Bank of Japan (BoJ) is extremely worried about recent yen moves. Hope that BoJ to take appropriate policy based on its mandate,” he added.

Furthermore, as per Kihara Seiji, the deputy chief cabinet secretary of Japan, they are prepared to take the appropriate actions if current FX swings continue.

After the country’s Finance Ministry (MOF) revealed that the Ministry, the Bank of Japan (BOJ), and the Financial Services Agency (FSA) convened today to review the recent FX moves, the Japanese yen moved higher. Still, it failed to hold gains and quickly swung to losses again.

It looks like the only option left to them is to threaten interventions against a declining yen. However, these interventions will only amount to a drop in the ocean and a lean against the wind as long as the BoJ maintains its monetary policy and the other central banks continue their normalization processes.

β€œShort-term, we see few opportunities for the yen to recover – with the exception of brief periods of price corrections. Other central banks would have to consider renewed rate cuts due to reduced inflation momentum for that to happen. That is only likely to happen next year. In our view, the yen remains the largest underperformer this year as a result.” economists at Commerzbank believe that the Japanese yen is unlikely to recover anytime soon.

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Meanwhile, the Japanese economy grew at an annualized pace of 3.5% in the second quarter, above the 2.9% market consensus.

Technically speaking, the pair appears very overbought and can crash anytime soon. The significant support is now at 140.

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