In the latest trading sessions, the USD/JPY pair has exhibited a steady upward trend, marking its third consecutive day of strength, propelled by a resilient US Dollar (USD). Market sentiment appears to favor the potential decision by the Federal Reserve (Fed) to abstain from implementing rate cuts in the upcoming March and May meetings. This positive sentiment is bolstered by robust data on consumer and producer prices released last week, supporting the USD/JPY pair, which is currently trading higher around 150.30 during the early European session on Tuesday.
ANZ analysts have predicted that the Federal Reserve (Fed) may initiate a rate-cutting cycle starting from July in mid-summer. The CME FedWatch Tool indicates a 53% probability of a 25 basis points rate cut by the US Fed in the June meeting.
The US Dollar Index (DXY), gauging the USD against six other major currencies, has halted its four-day losing streak, currently trading at around 104.30. Meanwhile, 2-year and 10-year yields on US bond coupons stand at 4.64% and 4.29%, respectively, at the time of writing.
In contrast, Japanese Finance Ministry official Atsushi Mimura highlighted on Tuesday the government’s ongoing communication and coordination with other countries concerning FX intervention. Emphasizing the importance of safety and liquidity in FX reserves management, Mimura mentioned the government’s ability to sell assets like savings and foreign bonds when intervention is deemed necessary.
Finance Minister Shunichi Suzuki echoed these sentiments, expressing concern about the negative implications of a weak Yen despite acknowledging both advantages and disadvantages. Suzuki also noted that while the Bank of Japan (BoJ) holds jurisdiction over monetary policy, there may be a time when interest rates rise.
Looking ahead, market participants are poised to closely monitor the Trade Balance data, including Import and Export figures for January, scheduled for release on Wednesday. Additionally, attention will shift to the Federal Open Market Committee’s (FOMC) meeting minutes, influencing future market dynamics.
