Japanese Yen begins the new week on a high note, reaching a three-month high against the US dollar.
The Japanese Yen (JPY) builds on Friday’s strong gains against the US Dollar (USD), driving the USDJPY pair. To a near three-week low in the 146.25-146.20 range during the Asian session. The Middle East’s escalating war, along with fears of another COVID-19-like respiratory sickness outbreak in China. Reduces investors’ desire for riskier assets. This follows rumors about a substantial shift in the Bank of Japan’s (BoJ) monetary stance early next year. And it appears to be a crucial element contributing to the JPY’s relative safe-haven status.
A confluence of variables dampens investors’ desire for risky assets while increasing demand for the safe-haven JPY.
Meanwhile, JPY bulls appear unmoved by recent less-hawkish statements by BoJ policymakers. Who stated that it was premature to discuss exiting negative interest rates. The USD, on the other hand, is being weighed down by increased expectations. That the Federal Reserve (Fed) would maintain the status quo at its December policy meeting. And begin decreasing interest rates in the first half of 2024. Even Fed Chair Jerome Powell’s attempts to dampen rate-cut expectations last Friday were unsuccessful. Did little to help the dollar or alleviate the bearish pressure on the USDJPY pair.
Market players are now looking for major impetus from important US macro data scheduled for the start of a new month, such as the carefully awaited US monthly jobs report, or Nonfarm Payrolls data, coming on Friday. Nonetheless, the aforementioned fundamental background suggests that the USDJPY pair’s path of least resistance is to the downside. This, in turn, raises the likelihood of an extension of the recent severe decline from the 152.00 region, or the YTD peak reached in November, during Monday’s light US economic calendar, which featured the solitary publication of Factory Orders data.
Market Movers for the Day: The Japanese Yen gets refuge flows amid global tensions and China is experiencing a respiratory sickness outbreak.
On Sunday, a US destroyer and three commercial ships operating in the Red Sea were targeted by drone and ballistic-missile attacks.
Iran-backed Houthi militants in Yemen have claimed responsibility for the latest incursion.
This comes after Israel’s airplanes bombed Gaza on Friday and discussions to extend a week-old truce with Hamas fell through, and represents a significant surge of maritime violence tied to the ongoing conflict.
The World Health Organization (WHO) has upped its monitoring of China’s hospitals due to an influx of instances of respiratory infections and unwell children complaining of pneumonia-like symptoms.
The Chinese health ministry stated on Saturday that the respiratory infection is caused by known pathogens and that there is no evidence of new infectious diseases, and it advised people to limit their exposure. big groups in public locations.
Over the weekend, BoJ board member Noguchi stated that there is no impending policy shift in the works because the rise in inflation is primarily attributable to cost-push factors such as higher import costs.
Noguchi stated that, while annual spring pay negotiations this year resulted in raises unprecedented in 30 years, the possibility of meeting the 2% inflation objective has just now emerged.
Dovish Fed predictions and falling US bond rates undercut the USD and pressurize the USDJPY.
Last Friday, Federal Reserve Chairman Jerome Powell stated that it would be premature to conclude. That they have reached a sufficiently restrictive stance or to speculate on when policy might ease.
Investors, on the other hand, appear to believe that the Fed has completed its round of rate hikes. And will shortly shift to a softening posture in 2024, causing US bond yields to fall further.
The yield on the benchmark 10-year US government bond is around a 12-week low. Undermining the US Dollar and putting downward pressure on the USDJPY pair on Monday.
Traders are now looking to the US Factory Orders data for some impetus. Ahead of the Tokyo CPI on Tuesday and this week’s other major US macro data, including the NFP report on Friday.
