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Dollar-Yen Spike: Will the Bank of Japan (BoJ) Move Next?

By Samir Al Khoury,

The price of the dollar against the Japanese yen reached 160.20 on Monday, April 29, 2024, marking its highest level since 1990. Currently, the dollar’s value against the yen hovers near the 156 level. Will we witness a new intervention by Japanese authorities to support the local currency, and if so, will it be sufficient?

Bank of Japan (BoJ) Governor Kazuo Ueda informed parliament that the central bank might raise interest rates sooner than expected if inflation exceeds projections. He emphasized that exchange rate fluctuations could negatively impact the economy and prices, hinting at the possibility of responding with monetary policy tools while closely monitoring the currency.

The substantial disparity between Japanese and American bond yields is currently pressuring the Japanese yen. For instance, the 10-year Japanese government bond yield stands at 0.90%, contrasting with the US Treasury bond yield of 4.50%, resulting in a gap of approximately 3.60%. This differential encourages interest trading, or carry trade.

Furthermore, the strength and adaptability of the US economy, coupled with reduced market speculation regarding the timing of US interest rate cuts, bolster the dollar against major currencies.

From a technical perspective, it appears that the dollar’s upward trajectory against the yen will persist in the near term. There is consistency in the 20-, 50-, and 200-day moving averages, indicating an upward trend, with the 20-day average surpassing the 50-day average, and the 50-day average surpassing the 200-day average. The Relative Strength Index (RSI) currently stands at 58 points, signifying upward momentum in the dollar’s value against the yen.

Should the yen break the 155.25 pivot point against the dollar, it may target support levels at 154.83, 154.27, and 153.85. Conversely, exceeding the pivot point could lead to targeting resistance levels of 155.81, 156.23, and 156.79.

Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.

Taurex is the trading name of Zenfinex Global Limited, Stochastic Africa SL Ltd, Zenfinex Global LLC, and Zenfinex Limited.

Zenfinex Global Limited is registered in the Republic of Seychelles with registration number: 8428731-1 and is regulated by the Financial Services Authority of Seychelles (license number SD092). Its registered office address is F20, 1st Floor, Eden Plaza, Eden Island, Seychelles.

Stochastic Africa (SL) Limited is a company registered in Sierra Leone with Company Number: SL270319STOCH05271 and is licensed by the Bank of Sierra Leone under license number BSL/SAL/2023 and with the registered office at 148D Wilkinson Road, Freetown, Sierra Leone.

Zenfinex Global LLC is a company registered with the Financial Services Authority in Saint Vincent and the Grenadines under registered number 138 LLC 2019. Its registered office is Hinds Building, Kingstown, Saint Vincent, and the Grenadines.

Zenfinex Limited is a company registered in England and Wales under registered number: 11077380. Authorised and regulated by the Financial Conduct Authority under firm reference number 816055. Its registered office is 4th Floor, 4 Eastcheap, London, EC3M 1AE, United Kingdom.

*All trading involves risk.

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