USDJPY falls on Monday, snapping a three-day winning run and reaching a new YTD high.
The USDJPY pair begins the new week on a lower note, reversing some of Friday’s advances to the 144.00 area. A new high since November 2022. Spot prices are trading around the 143.30 level. During the Asian session, down little more than 0.15% on the day. And appear to have broken a three-day gaining run.
The Japanese yen (JPY) gains somewhat in response to Masato Kanda, Japan’s top currency ambassador. Saying that Recent domestic currency changes have been “rapid. And authorities will respond to any excessive moves in the currency market. In addition, the Bank of Japan (BoJ) stated in the Summary of Opinions from the most recent monetary policy meeting conducted in June. That there is a substantial possibility that consumer inflation would reduce but not fall below 2% by the middle of the current fiscal year. This, in turn, encourages speculation that the Bank of Japan would abandon. Its ultra-easy policies, lending extra support to the JPY. Aside from that, a little US Dollar (USD) decline causes bulls to take some gains. And puts downward pressure on the USDJPY pair.
The Fed’s hawkish view should operate as a tailwind for the USD, limiting the pair’s losses.
On Friday, S&P Global reported that business activity was up. In June. The US economy dropped to a three-month low as services growth slowed for the first time this year. And the manufacturing sector contracted more. This, in turn, is viewed as a major factor weighing on the Greenback.
The overall picture, however, suggested that US economic growth accelerated in the second quarter. This, together with the Federal Reserve’s (Fed) hawkish view, may deter traders from putting strong negative bets on the USD, limiting any major corrective slide for the USDJPY pair for the time being. It is worth noting that. While the Fed decided earlier this month to suspend its year-long rate-hiking cycle. It also suggested that borrowing rates may still need to climb by the same amount. As much as 50 basis points by the end of this year.
Furthermore, during his two-day congressional appearance last week, Fed Chair Jerome Powell emphasized that the central bank will likely raise interest rates again this year, although at a “careful pace” to confront stubbornly high inflation. Powell also stated that the Fed does not expect rate reduction anytime soon and would wait until it is convinced that inflation is approaching the 2% objective. As a result, the market’s attention is now focused on this week’s publication of the US Core PCE Price Index – the Fed’s favored inflation indicator – on Friday. The data might affect market expectations regarding the Fed’s next policy action, driving USD demand and providing new directional impetus. to the USDJPY pair.
As a result, it is recommended to wait for some follow-through selling before concluding that spot prices have peaked in the short term.
