The Conflicting policy Expectations between the BoJ and the Fed continue to damage the Japanese yen.
The Japanese Yen (JPY) fell sharply against the US dollar on Tuesday. Reversing much of the previous day’s gains. Which were fueled by a probable Intervention by Japanese authorities. The Fundamental cause of the JPY’s weakness is the interest rate disparity between Japan anfd the United States (US). Which is projected to stay broad for some time. This, combined with a decent pickup in The US dollar (USD) demand boosted the USDJPY pair. And contributed to the robust intraday rise up.
Bets that the Fed will raise interest rates for an extended period of time, hence lifting the USD and supporting USDJPY.
The USD continued to rise during the Asian session on Wednesday. Boosted by new US macro data indicating relatively persistent inflation. However, the risk-off impetus, as demonstrated by the overnight drop in US equities markets and a sea of red throughout Asian equity markets. Provides some support for the safe-haven JPY. This, in turn, works as a headwind for the USDJPY pair ahead of the important FOMC policy announcement later today.
Daily Market Movers: The Japanese yen fails to profit on potential intervention-led advances.
During the first quarter, earnings and benefits increased, confirming the early year inflation surge.
This comes on top of Friday’s release of the US Personal Consumption Expenditures (PCE) Price Index. Which indicated to persistent inflation and reiterated predictions that the Federal Reserve will postpone interest rate cuts.
The data confirmed market expectations that the US central bank will begin the rate-cutting cycle only in September, sending the US dollar to a two-week high and providing a significant boost to the USDJPY pair on Tuesday.
The USD bulls, meanwhile, were undeterred by the Conference Board’s survey, which showed that the Consumer Confidence Index fell to 97.0 in April, the lowest level since July 2022, from a downwardly revised 103.1. In March.
Furthermore, the Chicago PMI stayed in negative territory for the fifth consecutive month, falling drastically from 41.4 to 37.9 in April, its lowest level since November 2022, yet this does little to slow the USD’s climb.
The risk-off impetus supports the safe-haven JPY while limiting gains ahead of the FOMC decision.
Meanwhile, the attention remains on the critical FOMC policy decision, which is expected to be announced later during the US session and will influence the USD and provide a new directional push to the USDJPY pair.
Traders will take clues from the US macroeconomic announcements on Wednesday, including the ADP report on private-sector employment, JOLTS Job Openings, and ISM Manufacturing PMI, as the main central bank event risk approaches.
