Japanese yen falls to a Multi Month low in response to the BoJ’s dovish hike on Tuesday.

The Japanese yen (JPY) fell for the seventh day in a row, reaching a four month low against the US dollar during Wednesday’s Asian session. Despite the historic move to raise short term interest rates for the first time since 2007. The Bank of Japan signaled that financial conditions will remain accommodating and fell short of providing indication regarding future policy measures. the rate of policy normalization.

The USD is underpinned by hawkish Fed views, which also strengthen the USDJPY pair.

Apart from that, the risk on mindset continues to erode the safe haven JPY. Which, together with recent US Dollar (USD) strength, pushes the USDJPY pair over the 151.00 round figure level.

Investors appear to be convinced that the Federal Reserve (Fed) will stick to its higher for longer interest rate narrative in the face of persistently high inflation. This supports rising US Treasury bond yields, propelling the USD Index (DXY). Which tracks the Greenback versus a basket of currencies, to a two week high and acting as a tailwind for the USDJPY pair. Meanwhile, the unrelenting JPY selling over the last week or two has fuelled speculation. That the Japanese government will intervene to prevent further weakness in the native currency. This could limit any additional gains for the currency pair ahead of the critical FOMC decision.

Daily Movers: Japanese Yen continues to be pushed by the BoJ’s dovish stance.

The absence of forward guidance for further tightening frustrated hardline. Bank of Japan dealers and continued to weigh severely on the Japanese yen. Which fell to its lowest level since November 2023 on Wednesday.
In a historic step on Tuesday, the Bank of Japan ended its negative interest rate policy. And announced its first rate hike since 2007, but committed to maintain monetary conditions supportive for the time being.
The Bank of Japan has suggested that it will cut purchases of commercial paper and corporate bonds. But will continue to purchase Japanese government bonds and step in when If yields are very high and rapid, it is necessary.

Intervention concerns may cap the main ahead of the critical FOMC monetary policy decision.

The strong US consumption and consumer inflation data fueled speculation. That the Federal Reserve may change its forward guidance to two 25 basis point rate reduction in 2024 instead of the three previously expected.
As a result, the focus will remain on the conclusion of the highly anticipated two day FOMC meeting. And updated economic estimates, especially the so-called “dot plot,” for new indications regarding the future rate-cut path.
Meanwhile, hawkish Fed forecasts continue to support rising US Treasury bond rates and favor USD bulls. Though intervention fears may restrict JPY losses and cap the currency pair’s upside.