Japanese yen strengthens as the Bank of Japan considers raising interest rates by 10 basis points on Thursday.

The Japanese yen (JPY) continued to rise on Monday as traders remained cautious ahead of the Bank of Japan’s (BoJ) policy meeting on Wednesday, which could result in a rate hike. Markets expect the Bank of Japan to raise interest rates by 10 basis points to 0.1% and to announce plans to reduce bond purchases.

Bank of Japan is largely expected to announce steps to decrease its bond purchases.

Traders may also find support if they unwind their carry trades ahead of the Bank of Japan’s policy decision. Masato Kanda, Japan’s senior currency ambassador, told the G20 on Friday that foreign exchange (FX) volatility hurts the Japanese economy. Kanda acknowledged a growing chance of a gentle landing and emphasized the importance of continuously monitoring the economy and implementing required measures, according to Reuters.

The US dollar falls as indicators of slowing inflation raise the prospect of three Fed rate cuts in 2024.

The US Dollar (USD) confronts problems as falling inflation and easing labor market conditions in the United States (US) feed predictions that the Federal Reserve (Fed) would lower interest rates three times this year, beginning in September.

Daily Market Movers: Japanese Yen gains due to predicted rate hikes by the Bank of Japan.

Reuters released a detailed article about the Bank of
Japan’s (BOJ) examination of past policies reveals a dramatic shift in the central bank’s attitude to inflation. The main takeaway from the review is that Japan is “ready for higher rates.” However, the evaluation will not result in any modifications to the price target or policy framework.
On Friday, the US Personal Consumption Expenditures (PCE) Price Index climbed 2.5% year on year in June, down slightly from 2.6% in May, meeting market forecasts. On a monthly basis, the PCE Price Index climbed by 0.1% after remaining constant in May.
US Core PCE inflation, which excludes volatile food and energy costs, rose to 2.6% in June, matching May’s gain and exceeding the prediction of 2.5%. The core PCE Price Index increased by 0.2% month on month in June, compared to 0.1% in May.
The headline The Tokyo CPI rose by 2.2% year on year in July, slightly less than the prior 2.3% increase. The Tokyo CPI excluding Fresh Food and Energy increased by 1.5% year on year, compared to an earlier increase of 1.8%. Furthermore, the CPI excluding Fresh Food increased by 2.2% in July, meeting market forecasts.

Federal Open Market Committee (FOMC) can “afford to wait” before making any modifications according to Bank of America.

According to Bank of America, the Federal Open Market Committee (FOMC) can “afford to wait” before making any modifications due to the United States’ solid economic growth. According to the bank, the economy “remains on robust footing” and that the Fed will begin decreasing rates in December.
Last week, Japanese Finance Minister Shunichi Suzuki, Chief Cabinet Secretary Yoshimasa Hayashi and top currency diplomat Masato Kanda According to Reuters, officials avoided commenting on foreign exchange problems.
The BlackRock Investment Institute stated in its mid-year outlook that Japan’s Bank of Japan will not hike interest rates at its meeting next week. Furthermore, JP Morgan anticipates that the Bank of Japan (BoJ) will not raise interest rates in July or at any other time in 2024.