Japanese yen has stalled the overnight recovery from an almost two-month low against the US dollar.
The Japanese yen (JPY) struggles to capitalise on a minor Asian session increase versus the US dollar, allowing the USDJPY pair to stall its retreat from the highest level since August 16 reached on Monday. The prospects of another interest rate hike by the Bank of Japan (BoJ) in 2024 and a more aggressive policy easing by the Federal Reserve (Fed) appear to be a crucial component providing a tailwind for the currency pair.
The uncertainty around the Bank of Japan’s rate hike curbs JPY gains while supporting the USDJPY pair.
Any major downside for the JPY, however, appears elusive in light of concerns that the Japanese government may interfere in the markets to maintain the home currency. Aside from that, rising geopolitical tensions in the Middle East may deter JPY bears from making aggressive wagers. Traders may also want to wait until this week’s release of the FOMC meeting minutes and US inflation data.
Daily Market Movers: Japanese Yen bulls remain undecided amid BoJ rate rise uncertainty.
Japan’s Vice Finance Minister for International Affairs, Atsushi Mimura, has warned against speculative maneuvers in the foreign exchange market, increasing concerns that the government may interfere to defend the Japanese yen.
Adding In response, Japan’s newly appointed Finance Minister Katsunobu Kato stated that the government would examine the possible impact of rapid currency movements on the economy and will take appropriate action.
Furthermore, expectations that Middle East tensions would escalate into a larger conflict drive haven flows toward the JPY, dragging the USD/JPY pair down from its highest level since August 16 reached on Monday.
In the most recent developments, Lebanon’s Hezbollah launched rockets at Israel’s port city of Haifa and a military camp near Tel Aviv, while Israel attacked a few structures in Beirut’s southern suburbs.
China’s official planner, the National Development and Reform Commission (NDRC), stated on Tuesday that the downward pressure on China’s economy is intensifying, weakening Investors’ preference for riskier assets.
Japan’s Prime Minister Shigeru Ishiba recently stated that the government is not in a position to hike interest rates further.
Japan’s Prime Minister Shigeru Ishiba recently stated that the government is not in a position to hike interest rates further, casting doubt on the Bank of Japan’s ability to tighten further in the coming months.
This, together with the uncertainties surrounding the Japanese general elections on October 27, might act as a headwind for the JPY and provide support for the USDJPY pair amid a short-term optimistic tone around the US Dollar.
Against the backdrop of Federal Reserve Chair Jerome Powell’s hawkish views, the strong US jobs report dampened prospects for more aggressive policy easing, keeping USD bulls near a multi-week high.
Traders are looking forward to the release of the FOMC minutes on Wednesday, followed by significant US inflation statistics on Thursday and Friday: consumer inflation and the Producer Price Index (PPI).
