Forex News
- AUD/JPY remains calm following missing domestic trade data expectations.
- Australia's Trade Balance shifted to a A$3,018M deficit in May, reversing April's surplus.
- The Japanese Yen may receive support amid the potential for government intervention.
AUD/JPY remains flat after recovering daily losses, trading around 112.10 during the Asian hours on Thursday. The currency cross held its ground as the Australian Dollar (AUD) showed resilience, even after domestic trade data significantly missed market expectations.
According to the Australian Bureau of Statistics (ABS), the Trade Balance unexpectedly swung into a deficit of A$3,018 million in May, a sharp reversal from the previous month's revised surplus of A$1,383 million. This fell well short of the market consensus, which had anticipated a surplus of A$2,200 million. The downturn was primarily driven by a 6.9% month-on-month plunge in exports, compounded by a 2.6% increase in imports.
The AUD/JPY cross moves little as the Japanese Yen (JPY) remains under intense pressure despite mounting evidence that the Bank of Japan (BoJ) may continue normalizing its monetary policy. Japan’s latest Q2 Tankan Large Manufacturing Index climbed to 22 from 17 prior, the highest level in eight years, strengthening the case for further interest rate hikes later this year.
The JPY continues to languish near its weakest level against the US Dollar (USD) in four decades. This prolonged weakness has kept traders on high alert for potential government intervention, which could put downward pressure on the AUD/JPY cross, especially ahead of a US public holiday when thinner market liquidity could magnify the impact of any official action. Reinforcing this caution, Finance Minister Satsuki Katayama reiterated warnings that authorities stand ready to respond appropriately to currency market developments at any time.
Economic Indicator
Trade Balance (MoM)
The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.
Read more.Last release: Thu Jul 02, 2026 01:30
Frequency: Monthly
Actual: -3,018M
Consensus: 2,200M
Previous: 1,791M
Source: Australian Bureau of Statistics
- GBP/USD attracts some buyers to around 1.3290 in Thursday’s Asian session.
- Burnham’s commitment to fiscal rules calms traders' nerves, supporting the British Pound.
- The US jobs data for June will be in the spotlight later on Thursday.
The GBP/USD pair gains traction to near 1.3290 during the Asian trading hours on Thursday. The British Pound (GBP) strengthens against the US Dollar (USD) as the UK's likely next Prime Minister, Andy Burnham, has eased market concerns by pledging strict fiscal discipline. The US Nonfarm Payrolls (NFP) data for June will take center stage later on Thursday.
Burnham vowed on Monday to deliver radical change to the nation's politics by handing more power to its regions and by encouraging collaboration over argument in a 10-year mission to spur "good" growth. Traders continue to assess the political transition in the UK following Burnham's emergence as the next leader.
Natixis analysts believe that maintaining investor confidence in the UK's public finances will be critical. While Burnham's commitment to fiscal discipline offers near-term support, markets will closely monitor future budgets for any signs that fiscal rules are being relaxed to finance higher public spending.
All eyes will be on the US jobs data later in the day as it could offer some hints about the US interest rate path. The US Nonfarm Payrolls (NFP) is expected to show 110,000 job additions in June, while the Unemployment Rate is projected to hold steady at 4.3% during the same period. Any signs of a resilient US labor market could lift the Greenback and act as a headwind for the major pair.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- NZD/USD attracts some dip-buyers and remains close to a one-week top, set on Tuesday.
- Fed rate hike bets, along with geopolitical risks, should support the USD and cap the pair.
- Traders might also refrain from placing aggressive directional bets ahead of the US NFP.
The NZD/USD pair edges higher following the previous day's two-way price moves and trades around the 0.5685 region during the Asian session on Friday. Spot prices, however, remain below a one-week high, touched on Tuesday, as traders keenly await the US monthly employment details for a fresh impetus.
The popularly known US Nonfarm Payrolls (NFP) report is a crucial driver of the Federal Reserve's (Fed) monetary policy and play a key role in influencing the US Dollar (USD) demand. Stronger data will reaffirm a resilient US labor market and bolster rate hike bets, while a dismal print would temper expectations for a more hawkish Fed. Nevertheless, the crucial report should help investors to evaluate the timing and likelihood of future interest rate changes, which, in turn, will determine the near-term trajectory for the buck and the NZD/USD pair.
Heading into the key data risk, traders have been pricing in around a 64% chance that the US central bank will raise borrowing costs in September and assigning a nearly 85% probability of a move by the end of this year amid sticky inflation. The bets were lifted by data, showing that consumer inflation accelerated to a three-year high in May. Moreover, several Fed officials also indicated that higher interest rates may be necessary to bring inflation back to the central bank's 2% target. This, to a larger extent, offsets Wednesday's unimpressive US data.
The US ADP report revealed that private-sector employment increased by 98K in June, down from the previous month's unrevised 122K and missing consensus estimates for a reading of 113K. Adding to this, the ISM Manufacturing PMI eased to 53.3 in June from 54 in the previous month. The data, however, does little to dent the underlying USD bullish sentiment amid hawkish Fed expectations. Apart from this, geopolitical risks support the safe-haven USD and warrants caution before positioning for a further appreciating move for the NZD/USD pair.
Iran and the US concluded a round of indirect talks in Qatar with no sign that they had made headway toward lasting peace amid tensions over the critical Strait of Hormuz. Separately, Russia launched a barrage of missiles and drones on Ukraine’s capital, Kyiv, early Thursday. This keeps geopolitical risks in play, which favors the USD bulls and should cap the NZD/USD pair. However, the Reserve Bank of New Zealand's (RBNZ) hawkish shift might hold back traders from placing aggressive bearish bets around the New Zealand Dollar (NZD).
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- AUD/USD holds steady as a stronger Australian Dollar was supported by positive domestic Trade Balance data.
- Australia's Trade Balance shifted to a A$3,018M deficit in May, reversing April's surplus.
- The US Dollar remains calm after Fed Chair Kevin Warsh struck a relatively subdued tone at Wednesday's ECB Forum.
AUD/USD inches higher after registering modest losses in the previous day, trading around 0.6900 during the Asian hours on Thursday. The pair holds ground as the Australian Dollar (AUD) remains stronger following the release of domestic Trade Balance data. Traders will closely monitor the US Nonfarm Payrolls figures for June later on Thursday.
Australian Bureau of Statistics (ABS) released on Thursday that the Trade Balance shifted to a deficit of A$3,018M MoM in May, following a surplus of A$1,383M in the previous reading (revised from A$1,791M). The market consensus was for a surplus of A$2,200M. Exports fell by 6.9% MoM in May from a rise of 7.2% seen a month earlier. Meanwhile, Imports rose by 2.6% MoM in May, compared to an increase of 0.2% seen in April (revised from 0.8%).
The AUD/USD pair trades within a tight range as the US Dollar (USD) stabilizes following a relatively subdued appearance by Federal Reserve (Fed) Chair Kevin Warsh at the ECB Forum on Central Banking on Wednesday. Warsh opted not to provide explicit guidance regarding the central bank's upcoming July policy decision. While he acknowledged that inflation remains too elevated and reiterated a firm commitment to the Fed's 2% target and institutional independence, his overall tone was perceived as less hawkish than anticipated. Additionally, Warsh noted a personal preference for winding down the central bank's bond portfolio but emphasized that any adjustments to the balance sheet would only occur after extensive public preparation.
The Greenback could face further headwinds on easing risk aversion amid a wave of optimistic geopolitical developments out of the Middle East. Qatari officials reported "positive progress" in the ongoing negotiations between US and Iranian diplomats regarding a memorandum of understanding, noting that both sides have agreed to continue their dialogue. Reinforcing this positive sentiment, US Vice President JD Vance stated that the discussions in Doha are going well and indicated that formal talks regarding the nuclear issue are expected to commence in the near future.
Economic Indicator
Trade Balance (MoM)
The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.
Read more.Last release: Thu Jul 02, 2026 01:30
Frequency: Monthly
Actual: -3,018M
Consensus: 2,200M
Previous: 1,791M
Source: Australian Bureau of Statistics
Australia's Trade Balance shifted to deficit of A$3,018M MoM in May, followed a surplus of A$1,383M in the previous reading (revised from A$1,791M), according to the latest foreign trade data published by the Australian Bureau of Statistics on Thursday. The market consensus was for a surplus of A$2,200M.
Further details reveal that Australia's Exports fell by 6.9% MoM in May from a rise of 7.2% seen a month earlier. Meanwhile, Imports rose by 2.6% MoM in May, compared to an increase of 0.2% seen in April (revised from 0.8%).
The Australian Dollar (AUD) edges slightly lower following the Australia’s Trade Balance report. At press time, the AUD/USD pair is trading at 0.6890, losing 0.02% on the day.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | -0.04% | -0.02% | 0.01% | 0.00% | -0.06% | -0.03% | |
| EUR | 0.01% | -0.03% | -0.02% | 0.03% | 0.03% | -0.03% | -0.02% | |
| GBP | 0.04% | 0.03% | 0.02% | 0.03% | 0.05% | -0.00% | 0.01% | |
| JPY | 0.02% | 0.02% | -0.02% | 0.02% | 0.03% | -0.06% | -0.01% | |
| CAD | -0.01% | -0.03% | -0.03% | -0.02% | 0.00% | -0.05% | -0.04% | |
| AUD | -0.01% | -0.03% | -0.05% | -0.03% | -0.01% | -0.05% | -0.04% | |
| NZD | 0.06% | 0.03% | 0.00% | 0.06% | 0.05% | 0.05% | 0.01% | |
| CHF | 0.03% | 0.02% | -0.01% | 0.00% | 0.04% | 0.04% | -0.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
What do Australia’s Trade Balance data mean for the Australian Dollar?
Trade Balance gives an early indication of net export performance. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand.
Even though the impact on the Reserve Bank of Australia (RBA) policy is usually indirect, Australia’s Trade Balance can influence the RBA because it provides insight into the strength of the external sector, economic growth, and national income.
A narrowing trade surplus or unexpected trade deficit may signal weakening export demand or slower growth among key trading partners. This might lead markets to expect a more dovish stance from the Australian central bank. However, if risk sentiment improves, this might help limit the Aussie losses as capital flows toward the riskier assets.
A larger-than-expected trade surplus can signal strong export demand or a resilient economy. This report could lead markets to expect that the RBA will hike interest rates or keep them elevated.
Technical Analysis: AUD/USD maintains the bearish vibe in the near term
In the daily chart, AUD/USD maintains a bearish near-term bias as spot remains capped beneath the 20-day Bollinger middle band and the 100-day moving average (MA). Price also trades well under the upper Bollinger band near 0.7115, underscoring overhead supply, while the Relative Strength Index (14) at around 32 hovers just above oversold territory, hinting at persistent but not extreme downside pressure.
On the downside, initial support emerges at the lower Bollinger band around 0.6845, where sellers may pause to reassess. On the topside, a first recovery hurdle stands at the Bollinger middle band near 0.6980, followed by the 100-day MA at 0.7074 and then the upper Bollinger band at 0.7115; only a sustained break above this layered resistance zone would start to challenge the prevailing bearish structure.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Trade Balance (MoM)
The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.
Read more.Last release: Thu Jun 04, 2026 01:30
Frequency: Monthly
Actual: 1,791M
Consensus: -
Previous: -1,841M
Source: Australian Bureau of Statistics
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- USD/CAD remains close to a 14-month high amid a combination of supporting factors.
- Oil prices hit a four-month low amid easing supply concerns, undermining the Loonie.
- The BoC-Fed policy divergence favors bulls amid a firmer USD and ahead of the US NFP.
The USD/CAD pair consolidates above the 1.4200 mark during the Asian session on Thursday as traders opt to wait for the release of the crucial US monthly employment details before positioning for any further gains. Spot prices, however, remain close to the highest level since April 2025 amid a combination of supporting factors.
Crude Oil prices have dropped to a fresh low since late February as the resumption of shipping traffic through the Strait of Hormuz eased fears of a prolonged supply shock. Adding to this, the Bank of Canada (BoC) maintained a dovish stance as policymakers are prioritizing a sluggish economy over inflation threats. This, in turn, continues to undermine the commodity-linked Canadian Dollar (CAD), which, along with a bullish US Dollar (USD), continues to act as a tailwind for the USD/CAD pair.
The US ADP report showed on Wednesday that private-sector employment increased by 98K in June, down from the previous month's unrevised 122K and missing estimates for a reading of 113K. Adding to this, the ISM Manufacturing PMI eased to 53.3 in June from 54 in the previous month. The data, however, does little to temper Federal Reserve (Fed) rate-hike bets. Moreover, lingering geopolitical risks continue to act as a tailwind for the USD, which, in turn, supports the USD/CAD pair.
In fact, Iran and the US concluded a round of indirect talks in Qatar with no sign that they have made headway toward a lasting peace agreement amid tensions over the critical Strait of Hormuz. Separately, Russia launched a barrage of missiles and drones on Ukraine’s capital, Kyiv, early this Thursday. This keeps geopolitical risks in play and favors the USD bulls. Apart from this, the divergent BoC-Fed policy expectations suggest that the path of least resistance for the USD/CAD pair is to the upside.
Traders, however, seem hesitant ahead of the US Nonfarm Payrolls (NFP) report, due later during the North American session. The closely-watched data will play a key role in influencing market expectations about the Fed's policy path and drive the USD demand. Furthermore, Oil price dynamics might continue to produce some short-term trading opportunities around the USD/CAD pair.
(This story was corrected on July 2 at 02:29 GMT to say, in the first paragraph, that “The USD/CAD pair consolidates above the 1.4200 mark during the Asian session on Thursday,” not Friday.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- USDJPY trades flat near 162.55 in Thursday’s early Asian session.
- Fed funds futures have priced in 64% odds of a September rate hike.
- Intervention warnings from Japanese officials might cap the upside for the pair.
The USD/JPY holds steady around 162.55 during the early Asian trading hours on Thursday. Traders prefer to wait on the sidelines ahead of the key US June employment report later on Thursday. Fears of currency intervention from Japanese authorities also caps the upside for the pair.
Strong US labor market data for the past three months has bolstered the outlook for US growth and raised exexpectationsor US rate hikes this year. This, in turn, could underpin the Greenback against the Japanese Yen (JPY).
Economists expect the US Nonfarm Payrolls (NFP) to show 110,000 job additions in June and the Unemployment Rate to hold steady at 4.3% during the same period. Fed funds futures traders are now pricing in nearly a 64% chance of a Federal Reserve (Fed) rate hike by September, according to the CME FedWatch tool.
The ADP National Employment Report on Wednesday revealed that private employment rose by 98,000 jobs in June, compared to 112,000 in May. This figure came in below the market consensus of 113,000.
Traders are on alert for possible intervention from Japanese officials. Japan's top currency diplomat, Atsushi Mimura, said on Wednesday that intervention two months ago to support the yen had been effective and that some US officials had been "supportive" of the move. Finance Minister Satsuki Katayama emphasized on Tuesday that the government was ready to take appropriate action against excessive currency moves.
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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