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USD/JPY reverses course, rises to 108.00 as Asian stocks turn positive

  • USD/JPY recovers to 108.00 as Asian equities turn positive.
  • BOJ’s Kuroda assured ample liquidity for markets, inviting offers for the anti-risk yen. 
  • Sustained risk recovery looks likely with markets pricing Fed rate cut. 

The anti-risk Japanese yen is losing ground, allowing a bounce in USD/JPY with the Asian markets recovering the lost ground. 

Risk recovery

The major Asian stocks, which were down by more than 1% earlier today, are now flashing green. The Shanghai Composite is currently trading 1.45% higher, while Japan’s Nikkei, South Korea’s Kospi are adding 0.6% each. 

The futures on the S&P 500 are sidelined, having dropped by 1.3% in early Asia. The equities changed course after the Bank of Japan (BOJ) governor Haruhiko Kuroda said the central bank is closely monitoring the situation in the financial markets and would provide ample liquidity to ensure financial stability. 

The USD/JPY pair also recovered from the session low of 107.25 with stocks and clocked a session high of 108.04 soon before press time. The pair is currently trading near 108.00. Kuroda’s comments overshadowed the dismal China data released at 01:45 GMT. China’s Caixin manufacturing purchasing managers’ index (PMI), which surveys small and medium-sized export-oriented units, came in at 40, indicating a contraction in the activity. Markets were expecting the PMI to print at 45.7 following January’s 51.7 reading. 

Looking forward, the selling interest in yen may strengthen, yielding further gains in USD/JPY if the risk recovery persists in Europe. 

That looks likely as Kuroda’s risk-supportive comments are accompanied by expectations for fresh easing by other central banks. For instance, the Federal Reserve (Fed) is expected to cut rates by 25 basis points in March. Some investment banks think the Fed could deliver a 50 basis point cut this month, followed by a 25 basis point cut in April. Meanwhile, Westpac and National Bank of Australia think the Reserve Bank of Australia will cut rates by 25 basis points on Tuesday. 

Technical levels

 

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