On Friday, June 14, the Japanese Yen (JPY) remained under selling pressure as the markets evaluated the Bank of Japan’s (BoJ) monetary policy announcements. The US economic calendar featured Export Price Index and Import Price Index data for May, along with the University of Michigan’s preliminary Consumer Sentiment Index for June. The BoJ kept its policy rate unchanged at 0% for the second consecutive meeting in June and did not make any changes to its massive JPY6 trillion monthly Japanese government bonds (JGB) buying programme. However, they announced plans to hold a meeting with bond market participants in July to decide on a specific bond buying reduction plan for the next 1-2 years.
As shown in the table below, the Japanese Yen was weakest against the US Dollar and experienced percentage changes against various major currencies. USD/JPY gained bullish momentum after the BoJ event, rising 0.6% on the day. The US Dollar also continued to strengthen against its rivals following a decline after soft inflation data on Wednesday. The risk-averse market environment, lack of demand for European currencies, and decline in the JPY all contributed to the USD capturing capital outflows. At the time of press, the USD Index was trading at its highest level since March, rising 0.25% on the day near 105.50. EUR/USD and GBP/USD traded lower, while XAU/USD clung to small daily gains as gold benefited from risk aversion.
In terms of risk sentiment, “risk-on” and “risk off” refer to investors’ willingness to take on risk during a specified period. In a “risk-on” market, investors are optimistic and more willing to buy risky assets, while a “risk-off” market sees investors seeking safer, less risky assets due to concerns about the future. Stock markets and most commodities rise during “risk-on” periods, while safe-haven assets like Gold, major government Bonds, and safe-haven currencies such as the Japanese Yen, Swiss Franc, and US Dollar perform well during “risk-off” periods. The Australian Dollar, Canadian Dollar, New Zealand Dollar, Ruble, and South African Rand tend to rise during “risk-on” markets due to their reliance on commodity exports for growth. On the other hand, the US Dollar, Japanese Yen, and Swiss Franc tend to rise during “risk-off” periods due to their status as safe-haven assets.
In summary, the Japanese Yen faced selling pressure as the BoJ maintained its policy rate and announced plans for a bond buying reduction in the future. The USD strengthened against its rivals amid a risk-averse market environment. In terms of risk sentiment, different currencies perform differently during “risk-on” and “risk-off” periods based on investors’ risk appetite and economic outlook. It is important for traders and investors to monitor economic data releases and central bank announcements to stay informed about market trends and potential opportunities for profitable trades.
