The USDJPY pair regains positive momentum on Wednesday climbing to a one-week high during the Asian session. With bulls now targeting the 132.00 round-figure level.
The risk-on environment weakens the yen and acts as a tailwind in the face of modest USD strength.
Hopes for averting a banking crisis continue to underpin a generally positive tone in the equity markets. This is seen undermining the safe-haven Japanese Yen (JPY) and acting as a tailwind for the major.
The acquisition of Silicon Valley Bank by First Citizens Bank & Trust Company calmed market concerns about the risk of contagion. In addition, US regulators reaffirmed the strength of the banking system, boosting investor confidence even further. This, combined with a lack of negative news from the banking sector in the last two weeks, contributes to reversing recent negative sentiment.
The Japanese yen is weighed down further by overnight dovish remarks by Bank of Japan (BoJ) Governor Haruhiko Kuroda. Who stated that it is too early to discuss exiting easy policy. In addition, a further of the US-Japan rate differential. Driven by the recent rally in US Treasury bond yields, contributes to the JPY’s depreciation. This, combined with the emergence of some US Dollar (USD) buying, gives the USDJPY pair a further boost. However, the Federal Reserve’s less hawkish stance may continue to act as a headwind for US bond yields, preventing USD bulls from making aggressive bets.
US Federal Reserve softened its stance last week.
It is worth noting that the US Federal Reserve softened its stance last week. to contain inflation and signaled that interest rate hikes would be paused. Under new Governor Kazuo Ueda, the Bank of Japan is expected to tweak its bond yield control policy and reduce its massive stimulus. This could help limit JPY losses and contribute to the USDJPY pair’s gains, at least for the time being.
Traders are now looking ahead to the US economic calendar, which includes the release of Pending Home Sales data. This, along with US bond yields, USD price dynamics, and broader risk sentiment, could give the major a boost.
However, will remain on important macro data due later this week beginning with the final The US GDP for the fourth quarter will be released on Thursday.
On Friday, the Tokyo Core CPI, China’s official PMI prints. And the Fed’s inflation gauge – the Core PCE Price Index – will be released. This will assist investors in determining the USDJPY pair’s near-term Analysis.
