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Key Points
- USD JPY gained some follow-through traction on Wednesday to hit a fresh 24-year high.
- Fed-BoJ policy divergence, poor domestic data weigh on JPY, extend support.
- Bulls turned cautious amid intervention concerns and ahead of key FOMC meeting minutes.
The USD JPY pair built on the steady uptrend that has been witnessed for the past week or so and climbed to a fresh 24-year high on Wednesday (12/10/2022). The currency pair maintained its bid price throughout the first half of the European session and held well above the 146.00 round figure. The Japanese yen gained fresh strength after the release of poor domestic data, which showed that order prices fell more than expected in August. This, along with the wide divergence in the monetary policy stance adopted by the Bank of Japan (Dovish) and other major central banks (Hawkish), continued to push the USD JPY pair higher for the sixth consecutive day. In fact, the BoJ has so far shown no intention of raising interest rates and is lagging behind in the policy normalization process. Adding to this, Japanese Prime Minister Fumio Kishida said on Tuesday that the BoJ needs to stick to its ultra-low policy settings until wages pick up. In contrast, the Fed is expected to stick to a faster rate-hiking cycle to combat stubbornly high inflation. Recent hawkish comments by several Fed officials, coupled with a strong US jobs report on Friday, raised bets for a 75 bps interest rate hike by the US central bank in November. That kept US Treasury yields higher, widening the US-Japan interest rate differential and supporting prospects for an extension of the well-established bullish trend.
The hawkish comments also suggest that speculation for more currency market intervention by Japanese authorities is holding traders back from placing fresh bullish bets around the USD JPY pair. Japanese Finance Minister Shunichi Suzuki reiterated earlier this week that the government is ready to intervene and respond appropriately to excessive FX moves. This, in turn, should limit the upside for spot prices. Traders also appeared reluctant and preferred to ignore the FOMC meeting minutes, due for release during the US session on Wednesday. The minutes will be closely scrutinized for clues on the Fed’s rate hike path, which will play a key role in influencing the USD price dynamics and provide some impetus to the USD JPY pair ahead of the US CPI report on Thursday. You can get USD JPY news every day through the News section only on the GIC Journal. In addition to USD JPY, you can get forex, commodity, gold, and other instrument news by staying updated on the GIC Instagram. If you already know the news about forex, it means you are ready to trade today by registering with GIC and enjoying all its features!
The hawkish comments also suggest that speculation for more currency market intervention by Japanese authorities is holding traders back from placing fresh bullish bets around the USD JPY pair. Japanese Finance Minister Shunichi Suzuki reiterated earlier this week that the government is ready to intervene and respond appropriately to excessive FX moves. This, in turn, should limit the upside for spot prices. Traders also appeared reluctant and preferred to ignore the FOMC meeting minutes, due for release during the US session on Wednesday. The minutes will be closely scrutinized for clues on the Fed’s rate hike path, which will play a key role in influencing the USD price dynamics and provide some impetus to the USD JPY pair ahead of the US CPI report on Thursday. You can get USD JPY news every day through the News section only on the GIC Journal. In addition to USD JPY, you can get forex, commodity, gold, and other instrument news by staying updated on the GIC Instagram. If you already know the news about forex, it means you are ready to trade today by registering with GIC and enjoying all its features!
