JPY Weekly - 19 February 2024
- Feb 19, 2024
Week in review
The USD/JPY opened the week at 149.17. It moved in a tight range below 149.50 on 12 February amid light trading during market holidays in Japan and various other countries in Asia. The pair fell to a low for the week of 148.93 in US trading hours as a fall in UST yields sparked dollar selling after overseas investors came online. However, the dollar was bought back due to a subsequent rise in UST yields and the USD/JPY climbed back to around 149.50. The pair hovered around the 149 level on 13 February as investors sat on the sidelines ahead of major events. UST yields rose sharply and the dollar strengthened across the board after the January CPI report, released during US trading hours, exceeded the market's forecast. The USD/JPY broke past 150 and rose to 150.88, its highest point since November 2023. In response to the move past 150, Vice Finance Minister for International Affairs Masato Kanda said the recent rapid weakening of the yen included clearly speculative moves and that the government would respond accordingly if necessary. This message was reinforced by Finance Minister Shunichi Suzuki who commented that rapid currency moves are undesirable for the economy, and that the government is watching the market even more closely. These and other comments from authorities worked to hold down upside. On 14 February in US trading hours, the USD/JPY fell back to below 150.50 after comments by Chicago Fed President Austan Goolsbee were seen as favoring the start of rate cuts and the rise in UST yields following the CPI announcement halted. The USD/JPY sank to around 149.50 on 15 February after US retail sales for January announced in US trading hours came in well below the market's forecast and UST yields declined, but it quickly recovered on the back of unexpectedly strong data including the New York Fed's Empire State manufacturing index, the Philadelphia Fed index, and new jobless claims. The USD/JPY was trading below 150.50 at the time of writing this report.
This week, the USD/JPY traded at the 150-level due to the strong US CPI but became top-heavy due to concerns of intervention by Japanese authorities (Figure 1). The dollar was strong overall against other major currencies, while receding speculation that the ECB would move early to cut rates kept European currencies relatively firm (Figure 2).
FIGURE 1: USD/JPY
Note: Through 16:00 JST on 16 February
Source: EBS, Refinitiv, MUFG
FIGURE 2: MAJOR CURRENCIES' RATE OF CHANGE VS USD THIS WEEK
Note: Note: Through 16:00 JST on 16 February
Source: Bloomberg, MUFG