Japanese yen has recovered slightly from its multi-week low against the US dollar on Wednesday.
The Japanese yen (JPY) finds some buyers on Thursday. Recouping some of its weekly losses versus the US dollar (USD) over the previous three days. The market sentiment remains fragile in the face of dwindling possibilities of an early rate cut by the Federal Reserve (Fed). Geopolitical tensions, and persistent concerns about China’s slowing economic development. This is in In turn, is considered as a crucial element benefiting the JPY’s relative safe-haven status, which, together with a minor USD downtick, puts some pressure on the USDJPY pair.
JPY’s gains should be limited as the BoJ is expected to maintain its dovish stance in January.
Any real appreciation in the JPY, however, appears difficult in light of growing acceptance. That the Bank of Japan (BoJ) will not terminate its negative interest rate policy this month. Furthermore, the positive US Retail Sales data reported on Wednesday dampened hopes for a March Fed rate drop. Which should boost the Greenback.
Aside from that, the recent widening of the US-Japan rate disparity may help to curb gains for the JPY. And limit the downside for the USDJPY pair.
Daily Market Movers: The Japanese yen strengthens slightly amid risk-off, lacks follow-through.
The Japanese yen gets some haven flows, but lacks bullish conviction amid predictions that the Bank of Japan will maintain its ultra-dovish posture at the January 22-23 meeting.
Wednesday’s strong US macro data further shattered hopes for an immediate shift in the Federal Reserve’s policy stance as soon as March and should serves as a tailwind for the US Dollar.
The Commerce Department stated that headline US retail sales climbed by 0.6% in December, while sales excluding vehicles also above market expectations.
The numbers show that consumer spending remains resilient. As does the underlying strength of the US economy, giving the Fed more leeway to keep interest rates higher for longer.
Bets on a March Fed rate drop acting as a tailwind for the US dollar and the USDJPY pair have been reduced.
This comes after Fed Governor Christopher Waller stated on Tuesday. That the central bank should not drop interest rates until it is apparent that lower inflation will be sustained.
The yield on the benchmark 10-year US government bond surged above 4%. Reaching its highest level since December 13, adding support to the dollar.
Geopolitical concerns and China’s disappointing economic growth data dampen. Investors’ demand for riskier assets, benefiting the safe-haven JPY while constraining the USDJPY pair.
In the most recent development in the Israel-Hamas conflict. Yemen’s Houthi rebels fired a kamikaze drone on a US-owned cargo ship in the Red Sea late Wednesday.
Pakistan launched a series of military strikes against terrorist hideouts in Iran’s Sistan Baluchistan province, stating. That it will continue to do so. the essential measures to protect its citizens.
Data released on Wednesday revealed that China’s economy grew at an annual pace of 5.2%. In the fourth quarter of 2023, slightly exceeding the stated 5% growth target.
However, a worsening housing crisis, rising deflationary threats. And weak demand raise concerns about the world’s second-largest economy’s shakier recovery.
