- The Japanese Yen is exhibiting continued strength against a broadly softer US Dollar for the third consecutive trading session.
- Market speculation regarding further interest rate hikes by the Bank of Japan, coupled with a generally risk-averse market sentiment, is bolstering the safe-haven appeal of the JPY.
- Renewed selling pressure on the US Dollar is also contributing to the downward trajectory of the USD/JPY exchange rate.
The Japanese Yen (JPY) is maintaining its upward momentum for the third straight day, appreciating against a modestly weaker US Dollar (USD) and pulling the USD/JPY currency pair back towards the 146.00 level during Thursday’s Asian trading session. Concerns about persistent inflationary pressures within the Japanese economy, in conjunction with the hawkish remarks made earlier in the week by Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, are reinforcing expectations of additional monetary policy tightening. These factors, combined with a slight weakening in overall global risk appetite – evidenced by a softer performance in equity markets – are proving to be key drivers supporting the safe-haven demand for the JPY. Market participants are closely watching upcoming inflation data for further clues on the BoJ’s next policy move.
Conversely, the USD is struggling to sustain its overnight recovery from the weekly low, as investors are seemingly adopting a wait-and-see approach ahead of the scheduled release of the US Producer Price Index (PPI) data and a highly anticipated speech by Federal Reserve (Fed) Chair Jerome Powell. The PPI data will provide insights into inflationary pressures at the wholesale level, while Powell’s remarks will be scrutinized for any hints regarding the Fed’s future monetary policy path. This cautious sentiment is further contributing to the selling pressure on the USD/JPY pair. However, growing optimism surrounding a potential de-escalation of trade tensions between the US and China could potentially cap further gains for the JPY. Moreover, diminished expectations for aggressive policy easing by the Federal Reserve could provide support for the USD and potentially limit further downside movement for the currency pair. The market is currently pricing in a lower probability of significant rate cuts by the Fed in the near term, reflecting a belief that the US economy remains relatively resilient.
