Japanese Yen ends a two-day losing streak versus the US Dollar.
The Japanese Yen (JPY) continues its steady intraday appreciation versus the US Dollar (USD). Dragging the USDJPY pair to a new daily low, below the mid-145.00s. As the European session begins on Tuesday. Escalating tensions between the US and Iran-backed Houthi rebels in Yemen underpin the safe-haven JPY. Which appeared unmoved by data showing Japan’s producer prices climbed at the slowest pace in five years. Since February 20, 2021. Any major appreciation in the JPY. However, appears constrained in the face of dwindling odds of a change in the Bank of Japan’s (BoJ) policy position.
According to reports quoting sources, BoJ Governor Kazuo Ueda’s statements last week were misconstrued. And policymakers saw no reason to alter the negative interest rate policy this month. This, in turn, may deter JPY bulls from taking aggressive wagers, limiting losses for the USDJPY pair ahead of the release of the latest US consumer inflation numbers on Tuesday. Some repositioning trades may infuse volatility and allow traders to seize short-term opportunities in the run-up to the key data risk. However, traders may choose to wait for further clarification on the timeframe. In 2024. The Federal Reserve (Fed) will begin reducing interest rates. As a result, the spotlight will remain on the key FOMC policy decision on Wednesday.
Daily Market Movers: The Japanese Yen benefits from geopolitical uncertainties while shrugging off weaker local data.
The Japanese yen was the worst-performing G10 currency on Monday. With news downplaying speculation that the Bank of Japan was on the verge of tightening policy.
According to Reuters on Friday, citing three sources familiar with the Bank of Japan’s thinking, Governor Ueda’s remarks on policy alternatives last week were not intended to hint at a prospective exit timetable.
According to Bloomberg News, which cited sources, BoJ officials have yet to see enough evidence of strong wage growth to justify quitting the policy. This month’s interest rate policy is negative.
This follows the recent surge in US equities markets, which finished at a fresh high for the year on Monday, putting severe downward pressure on the safe-haven JPY.
According to a US defense official, Iran-backed Houthi rebels in Yemen fired a land-based cruise missile on Tuesday, boosting demand for the JPY and driving the USDJPY pair down.
The JPY bulls are unconcerned with data showing that Japan’s Producer Price Index (PPI) slowed for the 11th consecutive month in November, recording the worst rate of expansion since February 2021.
Meanwhile, the US Dollar struggles to benefit on the bullish US jobs data-inspired positive rise amid uncertainties regarding When the Federal Reserve may begin to ease policy rates and slash rates.
According to a New York Fed survey released on Monday, respondents predict inflation to be 3.4% a year from now, down from 3.6% in October and the lowest number since April 2021.
This, together with stronger-than-expected US employment data. Raised chances of a gentle landing for the US economy and pushed back estimates for the first rate drop in March 2024.
Investors are looking for a new impetus from the US CPI ahead of the FOMC meeting on Wednesday.
Investors are now anticipating the release of critical US consumer inflation data. Which is likely to indicate that the headline CPI grew by 0.1% in November and the yearly rate fell to 3.1%.
Meanwhile, the core index (which excludes volatile food and energy costs) is expected to rise. In November, the rate increased from 0.2% MoM to 0.3% and remained stable at 4.0% YoY.
The attention, however, will remain on Wednesday’s highly anticipated FOMC monetary policy decision. Which will play a significant role in affecting the near-term USD price dynamics.
