USDJPY continues to fall as hawkish sentiment toward the Bank of Japan’s policy stance grows.
USDJPY falls for the second straight day, trading at 141.20 during Asian hours on Wednesday. Following comments made by Bank of Japan (BoJ) board member Junko Nagakawa, the Japanese yen (JPY) remained strong.
Nagakawa of the Bank of Japan remarked that if the economy and inflation meet expectations, the bank may modify the degree of its monetary easing.
Nagakawa, a BoJ board member, noted that the central bank may change the extent of its monetary easing if the economy and prices align. Its forecasts. Despite the July rate hike, real interest rates remain deeply negative, and monetary conditions are still accommodating. If long-term interest rates rise, the BoJ may reassess its tapering strategy during policy meetings, as necessary.
The USDJPY pair’s decline also driven by the Bank of Japan and the US Federal Reserve’s opposing monetary policies, which have encouraged the unwinding of carry trades and increased demand for the Japanese currency. Kazuo Ueda, Governor of the Bank of Japan, underlined the central bank’s commitment to increase interest rates as long as the Japanese economy satisfies its expectations through fiscal year 2025.
US Dollar (USD) remains sluggish, as Treasury yields continue to fall ahead of the US Consumer Price Index (CPI) data.
The US Dollar (USD) remains sluggish, as Treasury yields continue to fall ahead of the US Consumer Price Index (CPI) data set to be released later. in the North American timezone. The next inflation data may provide new insights into the likely magnitude of the Federal Reserve’s (Fed) interest rate drop in September. Furthermore, the recent US job market report raised doubts about the probability of an aggressive Fed interest rate cut.
According to the CME FedWatch Tool, markets fully expect the Federal Reserve to decrease interest rates by at least 25 basis points (bps) at its meeting in September. The possibility of a 50 basis point rate drop has decreased to 31.0%, from 38.0% a week ago.
