Japanese yen remains depressed, as the BoJ is expected to retain its present stance in June.
The Japanese yen (JPY) fell for the third straight trading day on Tuesday. The USDJPY pair was supported by a firmer US Dollar (USD). As investors remained cautious ahead of the Federal Reserve’s (Fed) decision and the US inflation numbers for May on Wednesday.
The Japanese equity market’s stability has weakened the JPY.
The Japanese yen weakened after conflicting data was provided on Monday. Japan’s Gross Domestic Product (GDP) Annualized revealed that the The economy contracted less than anticipated in the first quarter. Meanwhile, GDP (QoQ) fell in the first quarter, in line with flash statistics. Furthermore, the solid performance of the equity market has weakened the JPY. Investors are eagerly anticipating the Bank of Japan’s (BoJ) policy decision on Friday.
The US dollar remains stable due to the lessened likelihood of two Fed rate cuts in 2024.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies. Remains stable due to the lower possibility of two Federal Reserve (Fed) interest rate decreases in 2024. According to the CME FedWatch Tool, the chances of the Fed cutting interest rates. By at least 25 basis points in September have dropped to approximately 49.0%, down from 59.5% a week ago.
Daily Market Movers: The Japanese yen slips down due to dovish BoJ.
Nearly two-thirds of analysts polled by Reuters on Tuesday expect the Bank of Japan to begin cutting its monthly bond purchases at Friday’s policy meeting. This decision is a critical first step toward progressively lowering the central bank’s swelling balance sheet. According to Takeshi Minami, Chief Economist at Norinchukin Research Institute. “There is no longer any reason to continue large-scale purchases of government bonds. Since it has been judged that a 2% rise in prices is within reach.”
On Tuesday, the Nikkei 225 Index rose for the second day in a row. This upward trend paralleled the favorable results on Wall Street, where technology firms drove equities markets upward.
Japan Finance Minister Shunichi Suzuki said on Tuesday it is important. According to Reuters, the country’s fiscal strategy must continue to strive for economic growth and budgetary health in order to maintain public trust.
Japan’s 10-year government bond rate rises above 1.02% ahead of the Bank of Japan (BoJ) policy meeting on Friday. The central bank is anticipated to maintain existing interest rates, while traders are keeping a careful eye on any potential reductions in the bank’s monthly bond purchases.
Japan’s Gross Domestic Product (GDP) Annualized fell by 1.8% in the first quarter.
On Monday, Japan’s Gross Domestic Product (GDP) Annualized fell by 1.8% in the first quarter, compared to a previous loss of 2.0%. The data marginally beat market expectations for a 1.9% decline. Meanwhile, Japan’s GDP (QoQ) fell by 0.5%, consistent with the flash figures.
Rabobank said in its weekly report that the Federal Reserve may reduce. Rates rose in September and December, most likely due to a weakening economy rather than progress on inflation. This is because they believe the US economy is approaching a stagflationary period, with persistent inflation and an economic slowdown that will likely result in a moderate recession later this year.
The US Bureau of Labor Statistics (BLS) reported on Friday that May’s US Nonfarm Payrolls (NFP) climbed by 272,000, up from 165,000 in April. Wage inflation, as measured by average hourly earnings, increased 4.1% year on year in May, up from 4.0% (raised from 3.9%) in April, exceeding the market consensus of 3.9%.
According to Reuters, when appearing to parliament on Thursday, Bank of Japan (BoJ) Governor Kazuo Ueda said that inflation expectations are steadily growing, but have yet to hit 2%. Ueda stated, “We are still monitoring market trends following the March ruling. As we transition from our huge monetary stimulus, it is appropriate to limit bond purchases.”
