In the early Asian session on Thursday, the USD/JPY pair dipped to 161.55, halting its three-day upward trend. The decline was attributed to a weaker US Dollar across the board. Investors are eagerly awaiting the release of the US Consumer Price Index (CPI) data for June, scheduled for later in the day, as well as a speech by Federal Reserve Chair Raphael Bostic.
Fed Chair Jerome Powell recently acknowledged advancements in inflation, but emphasized the need for greater confidence in inflation reaching the Fed’s 2% target before considering a policy rate cut. Traders are anticipating that the Fed will maintain the benchmark interest rate in the 5.25% to 5.5% range at its upcoming meeting in July. The outcome of the US CPI inflation report could potentially influence the Fed’s policy statement and pave the way for a rate cut in September.
Meanwhile, there is growing speculation that the Bank of Japan (BoJ) may raise interest rates at its July meeting. This speculation has provided some support to the Japanese Yen. Peter Boockvar, chief financial officer at Bleakley Financial Group, suggested that the weakening Yen could prompt the BoJ to take action sooner rather than later.
The Japanese Yen is influenced by various factors, including the performance of the Japanese economy, the BoJ’s policies, yield differentials between Japanese and US bonds, and trader sentiment. The BoJ’s ultra-loose monetary policy has contributed to the Yen’s depreciation against other major currencies. Additionally, the policy divergence between the BoJ and other central banks, such as the US Federal Reserve, has favored the US Dollar against the Japanese Yen.
Furthermore, the Japanese Yen is often viewed as a safe-haven investment during times of market uncertainty, leading investors to seek refuge in the currency for its perceived reliability and stability. Overall, the USD/JPY pair’s movements are closely tied to economic data releases, central bank policies, and market sentiment.