Japanese yen falls for the third consecutive day on dovish BoJ expectations.
During the Asian session on Wednesday, the Japanese yen (JPY) continued to fall. Against the US dollar for the third day in a row, reaching its lowest level since December 6. Following a severe earthquake in central Japan. There is growing acceptance that the Bank of Japan (BoJ) will postpone its plan to shift away from its ultra-dovish position. Inflation in Tokyo, combined with dismal wage statistics, undermines the JPY. Aside from that, the underlying bullish tone surrounding the US Dollar (USD) propels the USDJPY pair to the 100-day Simple Moving Average (SMA) support breakpoint. Which has now turned resistance near the 147.45 level.
Reduced bets on an early Fed rate drop boost the USD and the USDJPY pair.
The overnight hawkish remarks of Federal Reserve (Fed) Governor Christopher Waller prompted. Investors to lower their expectations for an interest rate drop in March. This continues to promote higher US Treasury bond yields. And serves as a tailwind for the US dollar. Meanwhile, declining views on the Fed’s early policy easing. As well as geopolitical concerns and China’s economic troubles, continue to weigh on investor sentiment. Albeit failing to strengthen the safe haven JPY.
This implies that the The USDJPY pair’s path of least resistance is to the upside, indicating that the monthly rise may continue.
Traders are now looking for a boost from US Retail Sales data and Fedspeak.
Traders are now looking forward to the US economic calendar, which includes the publication of monthly Retail Sales numbers, for some momentum later in the early North American session on Wednesday. Aside from that, upcoming speeches by FOMC members, as well as US bond yields, will affect USD price dynamics and help to provide short-term trading opportunities around the USD/JPY pair. However, the attention will be on Japan’s National Core CPI on Friday, which will push the JPY ahead of the Bank of Japan’s decision next Tuesday.
Daily Market Movers: The Japanese yen remained weakened amid diverging BoJ-Fed Expectations.
The Japanese yen continues to be weighed. The chances of the Bank of Japan ending its negative rate policy have dwindled due to internal considerations.
Against the backdrop of Japan’s New Year’s Day earthquake, declining inflation rates in Tokyo and lower wage data ensure that the BoJ maintains the status quo.
The JPY did not benefit from a generally worse tone in the equity markets or from the ongoing geopolitical concerns caused by the Israel-Hamas conflict.
In the most recent event, the US launched another airstrike against a Houthi missile base in Yemen, citing a threat to commerce vessels and US Navy ships.
The US Dollar is strongly supported by lowered bets for a March interest rate cut by the Fed. Reserve and boosts the USDJPY pair.
Fed Governor Christopher Waller said on Tuesday that recent data allows the central bank to consider policy rate decreases, but only if inflation remains moderate.
Waller added that the Fed must be cautious and cannot rush into rate decreases. While the economy remains strong, sending US Treasury bond yields significantly higher.
The yield on the benchmark 10-year US government bond remains above the 4.0% level. Which is viewed as another tailwind for the Greenback.
The US macro data, published later this Wednesday, is projected to reveal. That monthly Retail Sales increased by 0.4% in December. While Industrial Production stayed steady.
Fed Governor Michael Barr Michelle Bowman’s scheduled speeches. During the North American session may also help to influence the US dollar.
