The USD/JPY continues to rise despite verbal intervention from the Japanese Minister of Finance. The wide gap between US and Japanese interest rates is a key factor in this increase. However, some experts believe that the US Dollar may have reached its peak, limiting the potential for further gains.
The USD/JPY saw gains on Thursday, reaching the mid-155.00s, driven by a rise in US Treasury Bond yields. The difference in interest rates between the US and Japan, with the US Federal Reserve setting rates at 5.25% – 5.50% compared to the Bank of Japan’s rates at 0.0% – 0.1%, is a major reason for the upward trend of the USD/JPY pair.
Despite warnings from Japanese Finance Minister Sunichi Suzuki about monitoring the FX market closely, the market seems to be unfazed by verbal interventions. Analysts doubt the effectiveness of direct intervention in influencing the pair.
The upcoming BoJ policy meeting is expected to maintain the current policy, with a possible increase in inflation forecasts. This could provide short-term support for the Japanese Yen. However, with inflation in Japan still below the target of 2.0%, significant policy changes are unlikely.
Commerzbank analysts suggest that the US Dollar may have already priced in expectations of future interest rate cuts, making it vulnerable to negative news. This could impact the reaction of the FX market to upcoming data releases, such as US first quarter GDP figures.
Overall, while the USD/JPY continues to rise, there are concerns about the sustainability of this trend due to factors such as interest rate differentials and market expectations regarding the US Dollar.