In the latest turn of events, the USD/JPY pair has tumbled to near 156.00 in the American session on Tuesday. This comes as the Japanese Yen (JPY) strengthens amid increasing expectations that the Bank of Japan (BoJ) will tighten its monetary policy further during its upcoming July meeting.
Experts predict that the BoJ will raise interest rates by an additional 10 basis points (bps). This anticipation is fueled by the continuous rise in inflation, which remains above the bank’s target of 2%. In June, the annual National Consumer Price Index (CPI) saw a steady increase of 2.8%.
Furthermore, the core CPI, excluding volatile food and energy items, accelerated to 2.2% from the previous release of 2.1%. While the National CPI, excluding Fresh Food, grew at a slower pace of 2.6% compared to the estimates of 2.7%, it still remained higher than the previous release of 2.5%.
BoJ policymakers are expressing concerns about the rising inflation levels attributed to the weak Japanese Yen. The depreciation of the Yen has led to higher exports, making them more competitive in the global markets.
On the other hand, the US Dollar (USD) is gaining appeal as a safe-haven asset amidst growing risk aversion. The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, has risen to around 104.50.
Looking ahead, investors are eagerly awaiting the release of the United States (US) Q2 Gross Domestic Product (GDP) and the Personal Consumption Expenditure Price Index (PCE) data for June. These economic indicators will provide insights into the potential timeline for the Federal Reserve (Fed) to initiate interest rate reductions.
Japanese Yen FAQs – Everything You Need to Know
- What determines the value of the Japanese Yen (JPY)?
- How does the Bank of Japan (BoJ) influence the Yen’s value?
- Why is the Japanese Yen considered a safe-haven investment?
In summary, the recent weakening of the USD/JPY pair can be attributed to the strengthening of the Japanese Yen amid expectations of further tightening by the Bank of Japan. This shift in monetary policy could have implications for inflation levels, global trade competitiveness, and investor sentiment. As the US Dollar continues to serve as a safe-haven asset, upcoming economic data releases in the US will be closely monitored for signals on the Federal Reserve’s future monetary policy decisions. Keep a close eye on these developments to stay informed and make well-informed investment decisions in the forex market.