Forex Today: Japanese Yen extends rally, Oil prices climb higher
Here is what you need to know on Monday, September 7:
The Japanese Yen (JPY) gathered strength against its major rivals on Monday and extended its rally during the Asian trading hours on Tuesday, reaching its highest level against the US Dollar (USD) since mid-February. The economic calendar will not feature any high-impact macroeconomic data releases. Later in the day, Bank of England (BoE) Governor Andrew Bailey and other members of the Monetary Policy Committee (MPC) will testify before the UK Treasury Select Committee on July's Monetary Policy Report.
Markets continue to price in an aggressive Bank of Japan (BoJ) policy-tightening cycle, boosting the JPY. At the time of press, USD/JPY was trading below 154.00, EUR/JPY was fluctuating near 178.75 and GBP/JPY was edging lower toward 208.00, with all three losing more than 1% so far this week.
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.00% | -0.11% | -1.34% | -0.29% | -0.22% | 0.53% | 0.19% | |
| EUR | 0.00% | -0.11% | -1.32% | -0.28% | -0.20% | 0.55% | 0.20% | |
| GBP | 0.11% | 0.11% | -1.31% | -0.17% | -0.09% | 0.66% | 0.31% | |
| JPY | 1.34% | 1.32% | 1.31% | 1.16% | 1.21% | 1.96% | 1.61% | |
| CAD | 0.29% | 0.28% | 0.17% | -1.16% | 0.12% | 0.83% | 0.48% | |
| AUD | 0.22% | 0.20% | 0.09% | -1.21% | -0.12% | 0.75% | 0.40% | |
| NZD | -0.53% | -0.55% | -0.66% | -1.96% | -0.83% | -0.75% | -0.35% | |
| CHF | -0.19% | -0.20% | -0.31% | -1.61% | -0.48% | -0.40% | 0.35% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Yen support builds as Japan wage surge bolsters BoJ hike case
Analysts at Deutsche Bank highlight that the recent Yen strength has “likely been helped by Japan’s real wages increasing by +2.4% year-on-year in July, exceeding expectations of +1.8% and marking the strongest growth since May 2021.” They add that “total cash earnings rose +4.7%, the largest increase since January 1997, accelerating from a revised +4.0% increase in June.” According to the bank, this “stronger-than-expected wage data reinforces the overwhelming case for the Bank of Japan (BoJ) to raise interest rates at next week’s policy meeting, following its previous hike three months ago, and supports the prospect of further monetary policy tightening in the months ahead.”
Crude Oil prices push higher as there are no signs of a de-escalation of the conflict in the Middle East. Secretary of Iran's Supreme National Security Council, Mohsen Rezaei, warned on Tuesday that Tehran would respond to what it calls US "economic warfare" by imposing a maritime exclusion zone across the Persian Gulf. Meanwhile, citing Kpler data, Al Jazeera reported that "an average of 10 commodity ships transited the strait per day over the past 10 days, marking the lowest level since May following US and Iranian strikes on tankers." After rising more than 1.5% on Monday, the barrel of West Texas Intermediate (WTI) is up about 1.4% so far Tuesday, trading above $92.
Gold (XAU/USD) continues to fluctuate in a relatively narrow range at around $4,400 after closing virtually unchanged on Monday.
AUD/USD stays in a consolidation phase above 0.7200 after closing the fourth consecutive trading day in positive territory on Monday. Earlier in the day, the data from Australia showed that the Westpac Consumer Confidence Index declined to -5.2% in September from 6% in August.
EUR/USD edges slightly lower after posting marginal gains on Monday but manages to hold above 1.1600 in the European morning on Tuesday.
GBP/USD struggles to gather recovery momentum after rising 0.2% on Monday and stays below 1.3550.
Sterling steadies as UK fiscal message aims to reassure markets
According to strategists at ING, Sterling "enjoyed a decent session yesterday," with some marginal support likely stemming from Chancellor John Healey’s first major speech. ING notes that Healey delivered "a firm message on fiscal discipline," which helped keep the rise in long-end gilt yields "broadly in line with the wider global bond sell-off." The bank adds that this stance is "likely intended to reassure markets ahead of what could be a steady flow of headlines about the October budget in the weeks ahead."
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.