Japanese yen fails to benefit from the hawkish BoJ minutes-driven intraday rally.
The Japanese yen (JPY) recovers some of its intraday losses against the US dollar, driving the USDJPY pair to the mid-153.00s heading into the European session on Wednesday. JPY bears have turned wary amid concerns that Japanese authorities may interfere in the markets to support the home currency.
The uncertainties around the Bank of Japan’s rate hike and the risk-on drive have weighed severely on the Japanese yen.
The hawkish Bank of Japan (BoJ) meeting minutes, which imply that the central bank would continue to Increase interest rates. If economic and pricing projections are met, the JPY will get some support.
Meanwhile, a minor fall in US Treasury bond yields encourages some US Dollar (USD) profit-taking after a rapid climb to the highest level since early July, which turns out to be another reason favoring the lower-yielding JPY. However, predictions that Japan’s political backdrop will make it difficult for the BoJ to raise interest rates further, along with the risk-on urge, may cap the safe-haven JPY. Furthermore, the probability of Republican Donald Trump winning support the USD bulls, which should limit losses in the USDJPY pair.
Daily Market Movers: Japanese Yen may struggle to capitalize on its small comeback versus the strong USD.
The Minutes of The September Bank of Japan policy meeting revealed that the central bank intends to gradually raise policy rates, although being cautious about global economic uncertainty, particularly from the United States.
This follows BoJ Governor Kazuo Ueda’s hawkish remarks last week and leaves the door open for further rate hikes, providing a minor boost to the Japanese yen during the Asian session.
The first market reaction, however, is brief and fades fast amid concerns about the BoJ’s ability to tighten monetary policy further in the aftermath of Japan’s political turmoil.
The US election results cause a dramatic surge in US bond yields and the dollar.
The US Dollar jumps across the board after exit polls indicate an early lead in crucial swing states for the Republican nominee, Donald Trump The USDJPY pair experienced a significant spike of approximately 250 pips.
Rising probabilities of Trump winning the election generate speculation about the imposition of potentially inflationary tariffs, which, combined with deficit-spending concerns, drive US Treasury bond rates considerably higher.
The yield on the benchmark 10-year US government bond rises to its highest level since July, adding to the USD’s strong bid tone and pulling flows away from the lower-yielding JPY.
