The rate of USD to JPY has been consolidating below 152 which is the all time high, but USD/JPY is making a move higher after a jump in US retail sales for February. Bank of Japan raised interest rates last week, but markets think that they don’t have much ammunition left, so traders have turned short on the Japanese Yen.

The February 2024 Durable Goods Orders report for the United States showed the following key figures:

• Overall Durable Goods Orders: Increased by 1.4%, surpassing expectations of a 1.1% rise. The previous month’s reading was revised downwards from -6.2% to -6.9%.
• Non-Defense Capital Goods Orders Excluding Aircraft: Rose by 0.7%, beating the forecast of 0.1%. The previous month’s reading was revised from 0.0% to -0.4%.
• Excluding Transportation: Increased by 0.5%, slightly exceeding the expected 0.4% rise.
• Excluding Defense: Surged by 2.2%, contrasting with the previous month’s decline of 7.9%.
• Shipments: Rose by 1.2%, a positive change from the previous month’s decrease of 0.8%.
• Full report

Overall, while the report shows strong growth in durable goods orders in February, negative revisions to the prior month’s figures dampen the overall upbeat sentiment. However, they’re not having much impact on this pair, as the main drivers remain the FED and the BOJ, which hiked rates recently.

The Bank of Japan’s decision to raise interest rates for the first time since 2007 is indeed a significant policy shift, signaling a departure from its long-standing negative interest rate policy. However, given the current global economic conditions, particularly the divergence in monetary policy between Japan and other major economies, the impact of strengthening the Japanese yen (JPY) may be limited in the short term.

We anticipate that despite this policy adjustment, the US dollar (USD) will continue to strengthen against the Japanese yen in the near future and break above the record highs of 152 soon. This projection is based on several factors, including broader global macroeconomic fundamentals and policy adjustments in both Japan and the US.

While the BoJ’s move may have symbolic importance and could potentially influence market sentiment, the prevailing economic conditions and policy trajectories of major central banks, particularly the Federal Reserve in the US, are likely to play a more significant role in determining the direction of the USD/JPY exchange rate.

USD/JPY Live Chart