Yen has slightly strengthened in value

US dollar saw some stability in morning trading due to increased confidence despite some turbulence in the US banking sector. The dollar index (DXY) which tracks the dollar against six other currencies remained relatively unchanged at 102.745 above the seven-week low seen last week.

News from last week revealed that First Citizens BancShares had agreed to acquire deposits and loans from Silicon Valley Bank which helped ease market anxiety. This was followed by statements from Janet Yellen, the US Treasury Secretary and Jerome Powell, the Chairman of the Federal Reserve who sought to reassure the market that the US banking system remains strong.

Meanwhile, Japan's consumer price index (CPI) saw a decrease in inflation rate from a 40-year high dropping to 3.3% in February from 4.3% the previous month. Friday's data showed that government support for public spending, a stronger yen and lower commodity prices helped ease the pressure on prices.

The core CPI, which excludes volatile fresh food prices, increased by 3.1% in the 12 months to February in line with expectations significantly lower than the 4.2% in January and at its lowest level since September 2013. However, it still exceeded the Bank of Japan's target of 2% inflation per year.

The nearly 19% reduction in electricity prices from the previous month is primarily due to the main factor of inflation decreasing. This is because Japan has released an additional 2 trillion yen to mitigate the impact of high inflation on the economy.

Gas prices have also decreased by 6.5% while fuel surcharges have dropped by 11%, as the greatly reduced global prices of consumer goods have led to a decrease in the import costs for Japan's public utilities.

The demonstrated inflation rate has helped the Bank of Japan maintain its tight policy stance as before as it has helped support the central bank's position against changes in the value of the dollar.

In recent times, the Bank of Japan has been under increasing pressure to tighten its policy stance due to the steep rise in inflation to a 42-year high in January. However, the bank has continued to maintain a special easing policy, stating that inflationary pressures are expected to ease in the near term due to government support. Nonetheless, the Bank of Japan expects that inflation will increase again in mid-to-late 2024 and anticipates that price pressures will remain within the target range of 2% by mid-2026.

Technical analysis data (5H)