Japanese yen struggles to maintain modest gains on concerns about more BoJ rate hikes this year.
The Japanese yen (JPY) fails to capitalise on minor intraday advances versus the US dollar, remaining near its lowest level since early August, which was reached the day before. Firming predictions that the Bank of Japan (BoJ) will refrain from raising rates further this year amid uncertainties about the next political leadership’s desire for the monetary policy cap gains for the JPY ahead of the general election in October 27.
Verbal involvement from government officials could help minimize any significant JPY drop.
The comments from Japanese officials stoked suspicions of a potential government intervention. This, together with forecasts that rising domestic inflation will allow the BoJ to hike interest rates, should limit the downside for the JPY. Furthermore, a slight US Dollar (USD) drop from a two-and-a-half-month high should help to limit any major appreciation for the USDJPY pair.
Daily Digest Market Movers: Japanese Yen traders become cautious despite mixed underlying signs.
Atsushi Mimura, Japan’s assistant finance minister for foreign affairs and senior currency diplomat, stated on Friday that recent movements in the Japanese yen have been somewhat quick and one-sided, adding that excess volatility in the FX market is undesirable.
Moreover, a spokeswoman for the Japanese government stated that It is critical for currencies to move in a stable manner that reflects fundamentals, and that authorities regularly monitor FX movements with a high level of urgency, especially speculative changes.
According to government statistics issued earlier today, Japan’s headline Consumer Price Index (CPI) fell to 2.5% year on year (YoY) in September, while the Core CPI, which excludes volatile fresh food items, retreated from a 10-month high.
Against the backdrop of Japan’s Prime Minister Shigeru Ishiba’s surprise resistance to additional rate hikes, evidence of reducing inflationary pressures cast question on how much room the Bank of Japan will have to continue raising interest rates.
Meanwhile, the markets had minimal reaction to the Chinese macro data, which revealed that the GDP expanded by 0.9% in The third quarter of 2024 had an annual growth rate of 4.6%, while Retail Sales and Industrial Production outperformed expectations.
Upbeat US data on Thursday signaled that the economy is still on good footing and reiterated expectations on a less aggressive easing by the Federal Reserve, which keeps US Treasury bond yields elevated and acts as a tailwind for the US dollar.
USD Index (DXY), which tracks the US dollar against a basket of currencies.
The USD Index (DXY), which tracks the US dollar against a basket of currencies, is approaching its highest level since early August and could act as a tailwind for the USDJPY pair, prompting some caution before planning for more losses.
Moving ahead, the US home market data Building Permits and home Starts and Fed Governor Christopher Waller’s anticipated address later during the North The American session may generate short-term trading chances leading into the weekend.
