Japanese Yen Goes on Volatility Drive after US Economic Uncertainty Surfaces


The Japanese yen has been notably volatile for a long time now, and today, that dynamic continues as the yen made some tremendous steps forward over the course of the Asia Pacific trading session.

In today's Asia Pacific trading session, the USDJPY pair has become the second most volatile currency on FXOpen's TickTrader platform this morning.

Indicative pricing only

There have been some economic factors surrounding both the Japanese and United States economies that have surfaced during the course of the morning, including some very interesting reports and releases of data from the US government on economic circumstances surrounding the country.

The USDJPY pair was trading at 157.74 on 1st May, according to FXOpen pricing, and began to decline from there, going down to 153.13 by Thursday, 2nd May, followed by a further dip to 151.85 on Friday, settling at 153.787 at 8.15 am UK time today (Monday, 6th May) having continued this level during the Asia Pacific session.

Last week, there was some speculation among analysts and market participants that the Bank of Japan had perhaps intervened in the currency market with the intention of supporting the performance of the yen, however now there is a lot of discourse within the market relating to the reports coming from the US.

One such matter is the apparent depreciation of US treasury bond yields. It is common practice for governments to issue bonds to raise funds for various purposes, such as financing public projects, covering budget deficits, or managing economic activities. The US, being one of the world's largest economies and most dominant influences across global markets and commercial culture, is an interesting case because the national debt is so high considering the country's overall buoyancy.

This means that a decline in the value of bonds is not as tedious as it may sound. The downward pressure on US bond yields, particularly on the shorter end, has been primarily driven by movements in short-term interest rates. Two, five, and 10-year Treasury yields have all experienced declines of approximately 24, 27, and 23 basis points, respectively, from their recent peaks.

The performance of the US economy over the past few years has been somewhat fascinating. A nation hampered by high-profile bank collapses, something that occurred during the 2008/2009 financial crisis, was fresh in the minds of most market participants, resulting in a myriad of large financial institutions with impeccable histories collapsing.

There were also wide-reaching lockdowns, and a national debt which resulted in the need for the debt ceiling to be increased to avoid insolvency, and huge competition in commercial enterprise from other giants like India and China.

Whether this is now beginning to wear thin and the US economy's ability to fend off recession whilst many European nations teeter on the edge of a recession is now a matter of thought. The latest non-farm payrolls report released on Friday, along with the ISM non-manufacturing PMI survey for April, indicated signals that the US economy might be beginning to regress back towards the broader trend.

The overall volatility between this combination of eastern and western currency is fascinating, especially given that speculation of rate cuts in the US is beginning to surface once again when the last time this was speculated, it amounted to nothing.

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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