USD/JPY slides back below 158.00 on broad Yen strength
- Japanese Yen rallies after BoJ Governor Ueda warns rising oil costs could fuel underlying inflation.
- The BoJ held rates in an 8-1 vote, with board member Takata again dissenting in favor of a hike; Ueda signaled the door to further tightening remains open.
- The Fed held rates on Wednesday, still projecting one cut this year, but flagged elevated upside risks to inflation from the Iran war and hotter-than-expected PPI data.
USD/JPY dropped 1.25% on Thursday, sliding back below the 158.00 handle to settle near 157.80 in a session dominated by broad Yen strength. The pair had rallied to within a few pips of the 160.00 level earlier in the week before reversing sharply, and Thursday's large bearish candle erased most of the gains accumulated over the prior five sessions. Price is now trading in the middle of the wide range between 152.00 and 160.00 that has contained price action since late January.
The Bank of Japan (BoJ) held its policy rate at 0.75% on Thursday, as widely expected, but the accompanying statement and Governor Kazuo Ueda's press conference carried a notably hawkish tone. Ueda warned that rising crude oil prices from the Middle East conflict could push underlying inflation higher, adding that companies may pass on costs more aggressively than they did after the war in Ukraine given that wages and prices are already rising actively. Preliminary shunto wage demand data is averaging close to 5.9%, with Rengo's first-round results due on March 23. Japanese markets will be closed on Friday for Vernal Equinox Day, which could thin liquidity and keep the pair range-bound heading into the weekend.
On the US Dollar side, the Federal Reserve (Fed) held rates at 3.50%-3.75% on Wednesday in an 11-1 vote, with Governor Miran dissenting in favor of a cut. Updated projections still point to one reduction this year, but Chair Jerome Powell noted it is "too soon to know" the full economic impact of the Iran conflict, and February's Producers Price Index (PPI) came in well above expectations at 0.7% MoM versus 0.3% forecast. Thursday's US data was mixed, with initial jobless claims falling to 205K against a 215K consensus while new home sales plunged 17.6% MoM.
USD/JPY daily chart
Technical Analysis
In the daily chart, USD/JPY trades at 157.85. The near-term bias is bullish as price holds well above the rising 50-day EMA near 156.70 and extends the rebound from the mid-152.00s. The wide gap between spot and the 200-day EMA around 153.70 underscores a firmly established uptrend, while the Stochastic RSI remains in elevated territory despite easing from extreme overbought, indicating persistent upside pressure rather than a completed top.
Initial support emerges at 156.70, where the 50-day EMA aligns with recent swing lows, followed by 155.90 ahead of the stronger 153.70 zone defined by the 200-day EMA. As long as price holds above 156.70, buyers are likely to probe resistance at 158.00, with a break exposing the recent peak near 159.90. A daily close below 155.90 would weaken the bullish structure and open a deeper correction toward 153.70, but the broader trend remains pointed higher while spot trades above that longer-term average.
(The technical analysis of this story was written with the help of an AI tool.)
Japanese Yen FAQs
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.
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.
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.
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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