Author: Mr. Amar – Technical Analyst

March was miserable for the Japanese Yen, which fell a staggering 5.83% this month. The yen was hurt by the US-Japan interest rate differential, which continues to widen. US Treasury yields rose to 2.38% last Thursday. Higher yields have weighed on the yen while providing some support to the US dollar. If the uptrend continues, USD/JPY could break the 123 line and continue moving north. The yen received strong support as Bank of Japan Governor Kuroda and Finance Minister Suzuki made remarks in parliament aimed at bolstering the yen, which was in a terrible slump.

Suzuki said that “exchange rate stability is important and acute volatility is undesirable,” while Kuroda stated that it is important for exchange rates to remain stable. The comments had the desired effect as the yen regained some gains today, but I expect those gains to be temporary, as the yen will be under severe downward pressure from an aggressive Fed and a dovish BoJ, which is a double blow to the heart and likely to lead to a resumption of the slump in and in.

USD/JPY price has surged lately as the Bank of Japan will offer to buy an unlimited amount of 10-year JGB at 0.25%. Retail margin trading is a big part of Japan’s forex market, accounting for 78% of Tokyo’s forex trading last year. These margin traders stand with bullish predictions as some say yes might hit 150 yen per dollar by this year. This causes Kuroda to reiterate that a weaker yen remains positive for Japan’s economy and policymakers would stick with easing measures, though added he is continuing to watch currency moves carefully. He also insists that inflation will trigger policy change, not the yen.