The USD/JPY pair is facing downward pressure for the second consecutive day, nearing a one-month low as traders remain cautious. The divergent monetary policies of the Bank of Japan (BoJ) and the Federal Reserve (Fed) are key factors influencing this trend.
BoJ Governor Kazuo Ueda’s commitment to raising interest rates if economic forecasts are met through FY2025 contrasts with the market’s expectations of a 25 basis points interest rate cut by the Fed. This disparity is leading to the unwinding of carry trades and a flow towards the Japanese Yen (JPY).
As a result, the US Dollar (USD) is struggling to maintain its recent gains, with the JPY benefiting from its safe-haven status amidst a cautious market sentiment. This dynamic suggests a bearish outlook for the USD/JPY pair, with potential downside pressure in the near term.
Investors are awaiting the release of the US Consumer Price Index (CPI) report for insights into the Fed’s rate-cut path, which could impact the USD’s price dynamics and offer a new direction for the USD/JPY pair.
Japanese Yen FAQs
- Value influenced by Japanese economy performance, BoJ policy, bond yield differentials, and risk sentiment.
- BoJ intervenes in currency markets to control Yen value, with ultra-loose monetary policy widening policy divergence with other central banks.
- Policies favor US Dollar against Japanese Yen due to differential between US and Japanese bonds.
- Japanese Yen considered a safe-haven investment during market stress.