Japanese yen has struggled to gather traction following the Bank of Japan’s decision on Tuesday.
The Japanese yen (JPY) dropped slightly versus its American equivalent after the Bank of Japan (BoJ) announced its decision on Tuesday. Albeit with little follow-through, and maintained above its lowest level since November 28 seen last week.
Japanese central bank decided to maintain its ultra-loose monetary policy settings.
The central bank maintained its ultra-loose monetary policy settings at the end of the January meeting. As predicted, and reduced its prediction for core inflation for the upcoming fiscal year. Furthermore, there were no revisions to forward monetary policy direction. Which along with the positive market attitude, weakened the safe-haven JPY.
Traders, on the other hand, are hesitant and are hoping for a new push from BoJ Governor Ueda’s words.
Traders, on the other hand, appear hesitant to put bold bets. Instead looking to BoJ Governor Kazuo Ueda’s comments at the post meeting news conference for clues about the interest rate forecast. In the short term, this will have a significant impact on JPY price dynamics. Meanwhile, investors continue to reduce their expectations for an early interest rate cut by the Federal Reserve (Fed) in light of the US economy’s continued resilience. This supports elevated US Treasury bond yields, which operate as a tailwind for the US dollar and should boost the USDJPY pair.
Daily Market Movers: Japanese Yen appears fragile as BoJ maintains its dovish stance.
The Japanese yen fell as the Bank of Japan announced its intention to retain ultra easy monetary policy settings at the end of its January policy meeting.
In its quarterly outlook report, the central bank stated. That risks to economic activity are generally balanced. And acknowledged the importance of monitoring whether the virtuous cycle between wages and prices will intensify.
In the accompanying monetary policy statement, the BoJ stated. That it will maintain QQE with YCC for as long as necessary and will not hesitate to implement additional easing measures if necessary.
Furthermore, the BoJ stated that Japan’s economy is projected to continue improving moderately. With the prospect of achieving persistent 2% inflation. continues to gradually increase.
The US Dollar is still strongly supported by declining probabilities of an early rate decrease. By the Federal Reserve and recent upbeat macro data indicating that the economy is in solid shape.
The current market pricing predicts a 40% possibility of a March rate drop, down from up to 80% a week ago. And a total of five 25 basis point rate cuts for 2024, compared to six two weeks ago.
The hawkish view allows the yield on the benchmark 10-year US government bond to remain stable at roughly 4.10%, just below the highest level since December, reached last week.
Middle East shows no signs of diminishing, with drone strikes by Iran-backed Houthis.
The violence in the Middle East shows no signs of diminishing, with drone strikes by Iran-backed Houthis. Rebels remain on commercial ships in the Red Sea.
Pakistan and Iran have resolved to handle their differences diplomatically. Whereas the Israel Hamas confrontation is on the verge of escalating into a large-scale war that will have a global economic impact.
Geopolitical tensions, together with continued worries over slowing economic development in China, might support the safe haven JPY while limiting any major rise for the USDJPY pair.
