USD/JPY has advanced near 155.85 in Wednesday’s early Asian session, showing a 0.24% increase for the day. The possibility of a Bank of Japan (BoJ) interest rate hike is expected to provide support for the Japanese Yen. Investors are keeping an eye on the US preliminary S&P Global PMIs for June, scheduled for release later today.
The USD/JPY pair is trading stronger around 155.85, breaking a two-day losing streak in the early Asian session on Wednesday. However, the upside potential for the pair may be limited as speculation grows about the BoJ continuing to hike interest rates to strengthen the currency.
A senior official in the ruling party, Toshimitsu Motegi, has suggested that the central bank should communicate its intention to normalize monetary policy more clearly, including through consistent interest rate hikes. This expectation of further tightening of monetary policy by the BoJ could lead to a stronger Japanese Yen against the US Dollar in the short term.
Despite some analysts predicting that the BoJ will maintain an accommodative monetary policy, others foresee no rate hikes in July or the remainder of 2024. The upcoming BoJ monetary policy meeting next week will be closely watched by investors.
On the other hand, the Federal Reserve is anticipated to cut interest rates in September, with a 96% probability of at least a quarter-point rate cut according to the CME FedWatch Tool. Investors will be closely monitoring key US economic data this week, including the US preliminary S&P Global PMIs for June and the upcoming US Q2 GDP and PCE data for June.
Japanese Yen FAQs
The Japanese Yen (JPY) is influenced by various factors such as the performance of the Japanese economy, the Bank of Japan’s policy, yield differentials between Japanese and US bonds, and trader sentiment. The BoJ’s interventions in currency markets play a crucial role in determining the value of the Yen, with its ultra-loose monetary policy impacting the currency’s depreciation against other major currencies.
The policy divergence between the BoJ and other central banks, particularly the US Federal Reserve, has widened the interest rate differentials, favoring the US Dollar over the Japanese Yen. The Yen is often considered a safe-haven investment, gaining value during times of market stress due to its perceived reliability and stability.
Understanding these factors can help investors make informed decisions about trading USD/JPY and navigating the currency markets effectively.