The Yen rises against the U.S. Dollar despite uncertainty over Bank of Japan policy
The Yen rises against the U.S. Dollar despite uncertainty over Bank of Japan policy
The Japanese Yen (JPY) remains in a tenuous position against the U.S. Dollar (USD), hovering near multi-month lows reached in early August. While the Yen attempted to rally on Tuesday, uncertainties surrounding the Bank of Japan's (BoJ) intentions regarding future interest rate hikes are holding back its progress. As a result, the safe-haven Yen faces resistance in gaining support, especially as global markets adopt an overall optimistic outlook.
Japan’s Prime Minister Shigeru Ishiba recently downplayed the likelihood of an immediate rate hike by the BoJ, dampening expectations for significant monetary policy changes. Ishiba’s comments have cooled hopes for more aggressive tightening measures, which typically strengthen a currency. Consequently, the potential for the Yen’s rise appears limited, especially in a “risk-on” market environment favoring higher-yield assets.
Meanwhile, the U.S. Dollar continues to benefit from resilient Treasury yields and expectations that the Federal Reserve may take a measured approach to rate cuts, FXStreet writes. According to the CME Group’s FedWatch Tool, many analysts are anticipating a 25-basis-point rate cut in November, though others speculate the Fed may choose to maintain current rates. These expectations have pushed U.S. Treasury yields above 4%, creating a favorable environment for the Dollar and putting additional pressure on the lower-yielding Yen.
The USD/JPY pair remains attractive to investors as market participants see potential buying opportunities if the pair dips to levels around 149.00. Analysts suggest that this level or a slightly lower mark at 148.50 may act as a strong buying zone, limiting downside risks for the Dollar against the Yen. However, a break below this level could lead the pair to test additional support around the 148.00 mark, potentially resulting in stronger bearish sentiment.
On the other hand, if the USD/JPY pair consolidates above the key psychological level of 150.00, it could signal renewed bullish interest. The technical outlook remains favorable, with indicators suggesting that momentum is still in positive territory, indicating the Dollar may challenge August highs around the 150.85 mark. Sustained movement above 151.00 would likely confirm further strengthening, pointing toward an extended rally in the near term.
Market attention now turns to the release of the Empire State Manufacturing Index and upcoming speeches from Federal Reserve officials, which may provide additional clues about the future trajectory of the Dollar and the Fed’s monetary stance.
At the time of writing, the USD/JPY pair is trading at 149.38, showing a 0.24% decline over the last 24 hours.
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