The market is waiting for confirmation about the Bank of Japan’s intervention in the foreign exchange market.
Full pricing for US rate cut in September
The Japanese yen fell during Tuesday's trading against a basket of major and minor currencies, continuing its losses for the second day in a row against the US dollar, moving away from its highest level in four weeks, with the continuation of corrections and profit-taking, in addition to the market awaiting confirmations about the Bank of Japan's intervention in the foreign exchange market on Friday.
Capping the greenback's gains, less aggressive comments from Federal Reserve Chairman Jerome Powell have raised the prospect of a 25 basis point rate cut by the Fed in September to full pricing.
Price overview
Japanese Yen Exchange Rate Today: The dollar rose against the yen by about 0.5% to (158.73¥), from the opening price of today’s trading at (157.98¥), and recorded its lowest level at (157.98¥).
The Japanese yen lost less than 0.1 percent against the U.S. dollar on Monday, its first loss in three days, after earlier hitting a four-week high of 157.17 yen per dollar.
BOJ INTERVENTION The Bank of Japan spent between 3.37 trillion yen and 3.57 trillion yen ($21.18 billion-$22 billion) buying yen on Thursday, less than three months after its last intervention in the foreign exchange market, daily operation data from the central bank showed on Friday.
As the yen continued to make strong gains against most major and minor currencies on Friday, speculation mounted that the Bank of Japan may intervene for a second day in a row to support the local currency.
The market is still waiting for the Bank of Japan's official data on the possibility of buying the yen on Friday. There will be a report at the end of the month from the Ministry of Finance that will confirm the amount spent on the new intervention.
US interest rate Federal Reserve Chairman Jerome Powell said at the Economic Club of Washington, DC, on Monday that the three consumer price readings issued during the second quarter of this year somewhat bolster confidence that inflation is returning to the 2% target in a sustainable manner. Powell explained: “We had three readings that were better than expected, and if you average them out, the outcome is a very good place.”
Following those comments, according to the CME Group’s FedWatch tool: Futures pricing in a 25bps chance of a US rate cut in September rose from 94% to 100%, and a November cut from 98% to 100%.
Japanese Yen Performance Forecast
The Treasury's confirmed currency interventions in April and May showed that policymakers are willing to be cautious about the timing of their moves, said Jane Foley, head of foreign exchange strategy at Rabobank.
“In order to get more bang for their buck, intervening in the currency market in quiet conditions or after weaker US economic data seems like a sensible move,” Foley added.
“The intervention this spring indicates that the Ministry of Finance is fully prepared to operate outside of normal trading hours in Tokyo,” Foley explained.
