USD/JPY down a high number from its previous peak – Protests in China, Kuroda boosts the yen


Over the weekend, and continuing, protests in China:

The first moves were flows into the USD on a “safe haven” basis (and out of “risk”):

USD/JPY traded higher but lagged, with the yen not losing as much ground as the AUD, EUR and others. The yen is also a safe haven flow. We then had remarks from Bank of Japan Governor Kuroda and Japanese Prime Minister Kishida which further reinforced JPY

JPY

The Japanese yen (JPY) is the official currency of Japan and, at the time of writing, is the third most traded currency in the world behind the US dollar and the euro. The JPY is widely used as a reserve currency and is used by traders as a safe haven currency. Originally set up in 1871, the JPY has a long history and has survived several world wars and other events. This was followed by the establishment of the Bank of Japan (BoJ) in 1882 and full oversight of the JPY by the Japanese government only in 1971. Japan has historically maintained a policy of monetary intervention, which continues to this day. The BoJ also adheres to a zero to near zero interest rate policy and the Japanese government previously had a strict anti-inflation policy. Any other changes in monetary policy by the central bank are closely watched by traders. Also, the overnight call rate is the main short-term interbank rate. The BoJ uses the call rate to signal monetary policy changes, which in turn impact the JPY. The BoJ also buys 10- and 20-year Japanese government bonds (JGBs) on a monthly basis to inject liquidity into the monetary system. The consistent yield on the benchmark 10-year JGBs helps serve as a key indicator of long-term interest rates. Economic data is also very important for the JPY. The most important of these releases in Japan are Gross Domestic Product (GDP), Tankan Survey (Quarterly Survey of Business Sentiment and Expectations), International Trade, Unemployment, Industrial Production and GDP readings. money supply (M2 + CD).

The Japanese yen (JPY) is the official currency of Japan and, at the time of writing, is the third most traded currency in the world behind the US dollar and the euro. The JPY is widely used as a reserve currency and is used by traders as a safe haven currency. Originally set up in 1871, the JPY has a long history and has survived several world wars and other events. This was followed by the establishment of the Bank of Japan (BoJ) in 1882 and full oversight of the JPY by the Japanese government only in 1971. Japan has historically maintained a policy of monetary intervention, which continues to this day. The BoJ also adheres to a zero to near zero interest rate policy and the Japanese government previously had a strict anti-inflation policy. Any other changes in monetary policy by the central bank are closely watched by traders. Also, the overnight call rate is the main short-term interbank rate. The BoJ uses the call rate to signal monetary policy changes, which in turn impact the JPY. The BoJ also buys 10- and 20-year Japanese government bonds (JGBs) on a monthly basis to inject liquidity into the monetary system. The consistent yield on the benchmark 10-year JGBs helps serve as a key indicator of long-term interest rates. Economic data is also very important for the JPY. The most important of these releases in Japan are Gross Domestic Product (GDP), Tankan Survey (Quarterly Survey of Business Sentiment and Expectations), International Trade, Unemployment, Industrial Production and GDP readings. money supply (M2 + CD).
Read this term:

Higher wage growth is exactly what the BOJ dreamed about. So far, the Bank awards higher Japanese prices inflation

Inflation

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Read this term cost-push factors (higher import prices and weaker yen combined) and says that this “cost-push” inflation is transitory. Wage growth, on the other hand, would support more stable and sustained CPI growth.

USD/JPY is down a hundred points:


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