Japanese yen rises as hawkish mood surrounds the Bank of Japan’s policy stance for next week.

On Monday, the Japanese yen (JPY) reversed its two-day losing streak. Traders are bracing for the Bank of Japan’s (BoJ) policy meeting next week, where an interest rate hike could be on the agenda to strengthen the JPY.

Japan’s Prime Minister, Fumio Kishida, claimed that normalizing the Bank of Japan’s monetary policy would help to promote a growth-driven economy.

According to Japan’s Prime Minister Fumio Kishida, adjusting the central bank’s monetary policy will help Japan’s transition to a growth-driven economy Nikkei Asia.

Speculative short positions in the yen, which had reached their second-highest level, have begun to fall following Japan’s anticipated yen-buying intervention this month, which stunned the market. According to the US Commodity Futures Trading Commission, market participants such as hedge funds held a net of 151,072 Yen short positions as of Tuesday. This represents a decline of 30,961 contracts from the previous week and the greatest drop since May 7, when short holdings decreased by 33,466 contracts, according to another Nikkei Asia article. Traders remain concerned about the likelihood of additional interventions.

The USDJPY may limit its upside as the US Dollar (USD) confronts difficulties from increased bets for a Federal Reserve (Fed) rate drop in September. increase, and concerns about the vulnerability of the US labor market remain. According to CME Group’s FedWatch Tool, markets now expect a 25-basis point rate drop at the September Fed meeting, up from 90.3% a week ago.

Daily Market Movers: Japanese Yen Remains Weak Despite Intervention Threat.

Under mounting pressure from his fellow Democrats, US President Joe Biden abandoned his re-election bid on Sunday and endorsed Vice President Kamala Harris as the party’s nominee to face Republican Donald Trump in the November election, according to Reuters.
President of the Federal Reserve Bank of New York, John Williams, remarked on Friday that the long-term trends that led to drops in neutral interest rates prior to the epidemic remain. Williams added, “My own Holston-Laubach-Williams According to Bloomberg, r-star estimates in the United States, Canada, and the Eurozone remain roughly unchanged from before the outbreak.
Japan’s National Consumer Price Index (CPI) maintained steady at 2.8% in June, maintaining the previous month’s figure and remaining at its highest level since February. Meanwhile, core CPI inflation increased to 2.6%, slightly higher than the previous data of 2.5% but somewhat below the consensus projection of 2.7%.
JP Morgan anticipates no rate hikes from the Bank of Japan (BoJ) in July or any time in 2024. A July rate hike is not their base case, and they do not anticipate any increases for the rest of 2024. They think it’s too early to take a bullish stance regarding the yen.
Kazushige Kamiyama, a senior Bank of Japan (BoJ) official and the central bank’s Osaka branch manager, stated on Thursday that the BoJ intends to keep the monetary environment as liberal as possible, according to Jiji News Agency.
During an interview with Bloomberg News on Tuesday, Donald Trump warned Fed Chair Jerome Powell not to lower US interest rates before the November presidential election. However, if re-elected, Trump has stated that he will let Powell to finish his term provided he continues to “do the right thing” at the Federal Reserve.

Bank of Japan (BoJ) entered the foreign exchange market on consecutive trading days last Thursday and Friday.

Data released on Tuesday revealed that the Bank of Japan (BoJ) entered the foreign exchange market on consecutive trading days last Thursday and Friday. The current account balance data from the BoJ was issued According to Nikkei Asia, government sector transactions are expected to drain over ¥2.74 trillion ($17.3 billion) of liquidity from the financial system on Wednesday.
Fed Chair Jerome Powell stated earlier this week that the three US inflation readings this year “add somewhat to confidence” that inflation is on track to meet the Fed’s target sustainably, implying that a transition to interest rate decreases is not far off.