Japanese yen is attracting follow-through buying as the Bank of Japan raises interest rate expectations again.

The Japanese yen (JPY) gained strong bullish momentum for the third day in a row on Thursday. Reaching a nearly four week high against the US dollar during the Asian trading session. In February, the Consumer Price Index (CPI) in Tokyo. Japan’s capital city, recovered from a 22-month low and returned to above the Bank of Japan’s (BoJ) 2% target level. This adds to concerns that the ongoing yearly wage negotiations will Pay raises. For the second year in a row might boost demand driven inflation and raise speculations on an impending shift in the BoJ’s policy stance, supporting the JPY.

Meanwhile, bulls appear unconcerned by Japan’s real wages falling for the 22nd straight month in January. Furthermore, suggestions that the Bank of Japan may lower its forecast for consumption. And manufacturing output this month due to signs of weakness in the economy. That highlight the fragile status of its recovery do little to dampen the optimistic feeling around the JPY.

The uncertainty around the Fed’s rate-cutting strategy has USD bulls on the defensive.

The US Dollar (USD), on the other hand, is nearing its lowest level since early February. On uncertainty regarding the Federal Reserve’s (Fed) rate drop path, which further contributes. The USDJPY pair is sliding closer to the mid-148.00s.

Daily Market Movers: Japanese Yen stands tall around multi-week high on BOJ rate hike bets.

A spike in Tokyo inflation revives speculations. That the Bank of Japan would abandon its ultra easy monetary policy settings as early as this month. While also supporting the Japanese yen.
The Jiji News Agency reported on Wednesday that the Bank of Japan may consider terminating negative interest rates amid optimism. That this year’s salary discussions will generate positive results to stimulate spending.
According to data released on Thursday, real earnings for Japanese workers fell in January for the 22nd consecutive month. Albeit at the slowest pace in almost a year due to weakening pricing pressures.
Junko Nakagawa, a policymaker of the Bank of Japan, remarked that
While Japan’s economy steadily progresses toward meeting the price target, the central bank gathers information for policy decisions.
Federal Reserve Chair Jerome Powell told US legislators on Wednesday that the central bank would lower interest rates this year, but he wants to see more evidence that inflation is falling to the 2% objective.
Minneapolis Fed President Neel Kashkari stated that he had planned two interest-rate cuts for 2024 and that he may lessen the amount of cuts in response to the incoming improved macro data.

The market is focused on Friday’s release of the critical US NFP report.

According to Automatic Data Processing (ADP), private-sector employment in the United States increased by 140K in February, less than the predicted 150K, while salaries rose at the weakest rate in two and a half years.
The data alludes to symptoms of a weakening labor market and leaves the door open for Fed rate cuts later this year, undermining the US dollar and putting pressure on the USD/JPY pair.
Traders are now anticipating Powell’s second day of hearing before the Senate Banking Committee, which, coupled with the US Weekly Initial Jobless Claims and Trade Balance data, may provide some impetus.
The attention, however, will remain on the release of the carefully awaited US monthly employment data, known as the Nonfarm Payrolls (NFP) report, on Friday.