Japanese yen fell following the release of trade deficit statistics on Wednesday.

The Japanese yen (JPY) fell against the US dollar (USD) on Thursday. The USDJPY pair strengthens as the Japanese yen stays weak following Wednesday’s record trade deficit news. Traders are anticipating Bank of Japan (BoJ) Governor Kazuo Ueda’s appearance before parliament on Friday, when he will discuss the central bank’s decision to hike interest rates last month.

Analysts expect the Bank of Japan to raise interest rates before the end of this year according to a Reuters poll, 31 of 54.

According Reuters A poll conducted from August 13 to 19 and published on Wednesday found that 31 out of 54 analysts expect the Bank of Japan to raise borrowing prices before the end of the year. The median projection indicates a 25 basis point increase, bringing the end-of-year rate to 0.50%.
The US dollar (USD) rose higher on Thursday, helped by a small increase in Treasury yields. However, the Greenback’s potential may be limited. As the Federal Reserve forecast to decrease interest rates by 100 basis points (bps) in 2024. Market analysts divided over whether the Fed would drop rates by 25 or 50 basis points at its September meeting.
The CME FedWatch Tool indicates that the markets are now pricing in a nearly 65.5% possibility of The Fed decreased interest rates by 25 basis points (bps) at its September meeting, bringing them down from 71.0% the day before. The probability of a 50 basis point rate cut rose to 34.5% from 29.0% the day before.

Daily Market Movers: Japanese Yen consolidates ahead of BOJ Governor Ueda’s address.

Traders are cautious ahead of Fed Chair Jerome Powell’s keynote speech at the Jackson Hole Annual Symposium on Friday. Powell’s announcement about the possibility of interest rate decreases in the United States (US) is widely anticipated.
FOMC Minutes for July’s policy meeting suggested that most Fed members agreed last month that they would likely drop their benchmark interest rate at the next meeting in September as long as inflation continued to cool.
Japan’s Merchandise Trade Balance slid into a deficit of ¥621.84 billion in July, reversing the surplus of ¥224.0 billion reported in June and falling short of market expectations of a ¥330.7 billion shortfall. In July, Japan’s imports increased by 16.6% year on year to a 19-month high of ¥10,241.01 billion, up from 3.2% in June. Exports climbed by 10.3% year on year to a seven-month high of ¥9,619.17 billion, falling shy of market expectations of 11.4%.

The majority of Fed policymakers decided to lower interest rates in September according to the most recent FOMC minutes.

On Tuesday, Federal Reserve (Fed) Governor Michelle Bowman cautioned against making any policy changes, citing continued inflationary risks. According to Reuters, Bowman cautioned against overreacting to individual data figures, which could erode previously made improvements.
According to Reuters, the Bank of Japan (BoJ) predicted that A strong economic recovery would help inflation reach its 2% target on a sustainable basis. This would support more interest rate rises, after last month’s move as part of the Bank of Japan’s continued drive to unwind years of substantial monetary stimulus.
According to the Financial Times, President Mary Daly of the Federal Reserve Bank of San Francisco reiterated on Sunday that the US central bank should reduce borrowing prices gradually. Furthermore, Federal Reserve Bank of Chicago President Austan Goolsbee cautioned central bank officials against maintaining a restrictive policy in place for longer than necessary, according to CNBC.
On Thursday, Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, said that the reports are simply encouraging overall and “it supports the Bank of Japan’s position and bodes well for future rate hikes, while the central bank would be careful because the previous rate increase produced a steep spike in the yen.