Despite the Bank of Japan’s recent reluctance to defend the yen, the USD/JPY pair continues to slide. It is now at a level that is a full two points below the opening range of November. It may face further weakness in the coming days. The USD/JPY is also being influenced by the Federal Reserve’s monetary policy outlook, as well as the US jobs data for the month. The next monetary policy meeting of the Bank of Japan is set for next week. However, most economists expect no change in monetary policy at that meeting.
The Fed will also release US job data on Friday. This data will likely have an influence on the AUD/USD. The Fed has said that it would be willing to raise interest rates at a faster pace than it did last time. The FOMC’s balance sheet is on track to wind down in June. This could provide traders with an opportunity to trade short-term opportunities. The Cleveland Fed has indicated that it is prepared to raise interest rates this year. Similarly, the CME Group Volatility Index tracks forward-looking risk expectations on the JPY/USD. It is derived from options on deeply-liquid JPY/USD futures.
The Bank of Japan’s monetary easing is expected to support the economy, but it is also undermining the yen. In fact, the yen breached the psychological 150 level against the dollar for the first time since August 1990. The BoJ’s recent reluctance to protect the yen suggests that Tokyo may be trying to slow the yen down. It may also be an attempt to stabilize the USD/JPY.
The Federal Open Market Committee’s recent decision to delay its monetary tightening further adds to the pressure on the USD/JPY. The Fed’s current monetary easing efforts are designed to maintain price stability, but it is also aimed at stabilizing wage growth. This puts pressure on US Treasury bond yields. The US Dollar is thus on defensive, and a decline in the exchange rate may also feed into retail sentiment. There is a chance that the yen could be re-supported, though. It is not known whether the Bank of Japan will pursue a second intervention in the near future.
The Federal Reserve will release its latest jobs report for the month on Friday, which will have an impact on the USD/JPY. Moreover, the Fed’s Chair Jerome Powell will give a speech on the central bank’s plans for the year. It will also provide traders with clues about the future direction of monetary policy. In addition, the Fed will likely release the ADP report and Prelim US Q3 GDP numbers. These data will help traders form a basis for their trading.
The yen has been weakened by the Bank of Japan’s dovish stance and the Federal Reserve’s upcoming monetary policy meeting. The Federal Reserve is on track to normalize monetary policy, but the Bank of Japan’s reluctance to defend the Yen could continue to undermine the currency. The dollar is still supported, but its strength will wane in the coming months.