Japanese yen falls as the BoJ is largely expected to keep interest rates steady on Friday.

On Thursday, the Japanese yen (JPY) retraced its recent gains as the US dollar (USD) advanced following a hawkish hold by the US Federal Reserve (Fed), bolstering the USDJPY pair. For the seventh time in a row, the Federal Open Market Committee (FOMC) maintained its benchmark lending rate between 5.25% and 5.50%. In its policy meeting on Wednesday, as largely expected.

The Japanese yen’s downside could be limited as caution prevails ahead of the Bank of Japan’s policy meeting on Friday.

The Japanese yen may experience modest depreciation. As investors await the Bank of Japan’s (BoJ) policy decision on Friday. While the BoJ is widely expected to keep interest rates constant. Traders will pay particular attention to any statements indicating a cut in the central bank’s monthly bond purchases.

The likelihood of a Fed rate cut in September has reduced to 61.5 percent, down from 69.4% a week ago.

The US Dollar Index (DXY), which measures the US dollar’s (USD) value against six major currencies, has recovered its recent losses. This rebound can be linked to the Federal Reserve’s aggressive posture. FOMC policymakers now expect only one rate drop this year, down from the three forecast in March.

Moreover the CME FedWatch Tool indicates the possibility of a Fed rate. September’s cut of at least 25 basis points has fallen to 61.5, from 69.4% a week earlier.

Investors are looking forward to the weekly Initial Jobless Claims. And Producer Prices Index (PPI) in the United States (US) on Thursday. Which will provide additional insight into economic circumstances.

Daily Market Movers: Japanese Yen falls as Fed takes hawkish attitude.

In a press conference following the Fed’s decision, Fed Chair Jerome Powell stated. That the restrictive monetary policy is having the expected effect on inflation.
The US Consumer Price Index (CPI) increased 3.3% year on year in May. Slightly lower than the previous estimate and predictions of 3.4%. The core CPI, which excludes volatile food and energy costs, climbed by 3.4% year on year in May, compared to In April, there was a 3.6% increase, and another 3.5% is expected.
According to the Japanese Producer Price Index (PPI), producer prices rose 2.4% year on year in May, above market estimates of a 2.0% increase, raising concerns that this may lead to higher consumer inflation.
Furthermore According to Reuters, Japan Finance Minister Shunichi Suzuki stated on Tuesday. That maintaining confidence in the country’s fiscal policy requires continuing efforts to achieve economic development and budgetary health.
Nearly two-thirds of analysts polled by Reuters on Tuesday expect the Bank of Japan to start cutting its monthly bond purchases at Friday’s policy meeting. This decision represents a critical first step toward gradually lowering the central bank’s swelling balance sheet.
Takeshi Minami, the chief economist at According to 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,” as reported by Reuters.
Moreover According to Reuters, while speaking to parliament last week, Bank of Japan (BoJ) Governor Kazuo Ueda noted that inflation expectations are progressively growing but have not yet reached 2%. “We have been closely monitoring market events since the March ruling. As we prepare to depart our huge monetary stimulus, it is reasonable to minimize bond purchases,” Ueda added.