Japanese yen gains strength amid concerns about intervention and declining US bond yields.
The Japanese yen(USDJPY) pair drops to the 154.00 mark during the Asian session as a result of fresh buying in the Japanese yen (JPY) on Tuesday and muted US dollar (USD) price action. The safe-haven JPY largely supported by geopolitical risks and speculation that Japanese authorities may step in to support the home currency. Meanwhile, the USD bulls remain cautious due to lower US Treasury bond yields and help the lower-yielding JPY even more.
The uncertainty surrounding the BoJ rate hike could limit the JPY’s gains and provide the pair with support.
The prevailing risk-on sentiment and the uncertainty surrounding the timing of the Bank of Japan’s (BoJ) next interest rate hike should limit any significant gains for the JPY. Additionally, US bond yields should be boost by expectations that US President-elect Donald Trump’s hailed policies will limit the Fed’s ability to cut interest rates further and cause inflation. As a result, the USD bulls benefit and the USDJPY pair’s downside may be limited fears of intervention continue to support the Japanese yen.
Governor Kazuo Ueda of the Bank of Japan stated on Monday that the economy was moving toward persistent inflation driven by wages, opening the door for additional tighter monetary policy.
Ueda stated that the gradual approach to policy adjustment is dependent on price trends and economic activity, but he gave few hints as to whether the BoJ would raise rates in December.
Ryosei Akazawa, Japan’s Economy Minister, stated on Tuesday that he hopes the cabinet will approve the economic package soon and that it is essential to increase wages for all generations.
Daily Market Update: Japanese yen receives some support from geopolitical uncertainties.
Amid concerns about intervention, the safe-haven Japanese yen receives some support from geopolitical uncertainties brought on by the protracted Russia-Ukraine war and the ongoing conflicts in the Middle East.
Last Friday, Japan’s Finance Minister Katsunobu Kato issued a warning, saying the government will keep a close eye on the foreign exchange market and take appropriate action against any overreactions.
Japan’s financial system The government’s position on foreign exchange remains unchanged, and authorities will continue to take appropriate action against excessive moves, Minister Katsunobu Kato reaffirmed.
Following last week’s post-US election blowout rally to a new year-to-date high, a slight decline in US Treasury bond yields led to some follow-through US dollar profit-taking.
The incoming administration of US President-elect Donald Trump anticipated to prioritize tax cuts and tariff hikes, which could increase inflation and restrict the Fed’s ability to lower interest rates.
Fed Chair Jerome Powell and other prominent FOMC members recently advocated for caution in rate cuts.
Fed Chair Jerome Powell and other prominent FOMC members recently advocated for caution in rate cuts, which benefits USD bulls and should cap the lower-yielding JPY.
The National Consumer Price Index (CPI) for Japan anticipated to be published on Friday and will affect the dynamics of the JPY price before the global PMI prints for the manufacturing and service sectors.
