The Japanese yen has been losing ground against the U.S. dollar at an alarmingly accelerating rate for over 30 days despite the country’s central bank raising interest rates for the first time since 2007.
The decline became so substantial that, by late April, the exchange rate exceeded ¥160 for $1 – a low not seen in 34 years.
The situation changed suddenly on Monday, April 29, when the yen made rapid and substantial gains, changing the rate to approximately ¥155.82 for $1.
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The move swiftly sparked speculation on whether there has been a government intervention, given that an organic trend reversal of such magnitude is highly unlikely, according to Nomura’s Takahide Kiuchi.
For its part, the Japanese government has decided to keep traders guessing as Masato Kanda, the Vice Minister of Finance for International Affairs, when inquired about a possible intervention, simply replied he has ‘no comment for now.’
The ministry took a similar approach in October 2023 when thin liquidity and jittery markets also caused seemingly anomalous movements.
Such a possibility is lent further credence as the markets are similarly jittery with JPY’s downtrend compared to USD and uncertainty about the American currency, given the FED’s rhetoric has recently taken a more hawkish tone amidst heating inflation data.
Additionally, liquidity is similarly thin, given Japan is celebrating Showa Day, a national holiday commemorating Emperor Hirohito’s birthday, on April 29.
What is next for JPY?
Despite Monday’s sharp turn, technical analysis (TA) for the yen, as retrieved from TradingView on April 29, remains generally bearish.
Indeed, the picture remains much the same with analysis based on the three longer time frames – 1 day, 7 days, and 30 days – and the overall rating remains on ‘sell’ with moving averages (MA) reading ‘strong sell,’ but oscillators stubbornly staying fixed on ‘buy.’
On the other hand, experts, including Bloomberg senior economist Taro Kimura, explained that while the yen’s outlook remains finely balanced, it is leaning slightly toward appreciation of the currency.
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