Japanese yen extends its overnight gains against the dollar.
The Japanese yen (JPY) strengthened for the second day in a row against the US dollar on Tuesday, dragging the USDJPY pair to 147.20-147.15, or a multi-day low during the Asian session. Geopolitical tensions in the Middle East show no signs of diminishing, which, together with the Bank of Japan’s (BoJ) hawkish tilt this week, turn out to be major reasons offering some support to the The JPY is a safe haven currency.
Bulls may choose to wait for the results of a two-day FOMC meeting on Wednesday.
Furthermore, the continuous decline in US Treasury bond yields, resulting in a narrowing of the US-Japan rate disparity, motivates JPY bulls amidst weak US Dollar (USD) price action. However, the Federal Reserve’s (Fed) declining prospects of a more aggressive policy easing in 2024, as well as an early interest rate hike in March, should operate as a tailwind for the Greenback and help limit losses in the USDJPY pair.
Traders may also refrain from taking directional bets, preferring to await the outcome of the highly anticipated two-day FOMC monetary policy meeting, Which is set to be revealed on Wednesday. This makes it essential to wait for strong follow-through selling before verifying that the USDJPY pair’s appreciating rise observed since the beginning of This month’s activities have concluded.
Daily Market Movers: Japanese Yen maintains its strength against USD, but lacks bullish confidence
In light of the Bank of Japan’s hawkish stance, fears. That further escalation of Middle Eastern conflicts may engulf the area in a larger war favor the safe-haven Japanese yen.
Last week, BoJ Governor Kazuo Ueda hinted that the grounds for phasing out massive stimulus. And raising short-term interest rates out of negative territory were falling into place.
According to reports, President Joe Biden will authorize US military action in the Middle East. Which will most likely begin within the next few days and be carried out in waves against a variety of targets.
The US Treasury has reduced its forecast for government borrowing to $760 billion. Down from a previous estimate of $816 billion, lowering US bond yields and eroding the US dollar.
The downside for the USDJPY pair appears limited. As traders may choose to await the outcome of a two-day FOMC policy meeting on Wednesday for clues about the timing of the first rate cut.
Investors have lowered their expectations for a more aggressive policy easing by the Fed in 2024. In response to positive US macro data and indicators that the economy remains in strong shape.
Traders may draw cues from Tuesday’s release of the Conference Board’s Consumer Confidence Index. And JOLTS Job Openings data as they approach the crucial central bank event risk.
Investors This week will also see the release of crucial US macroeconomic data. Slated for the start of a new month, including Nonfarm Payrolls (NFP) on Friday.
