During the early Asian trading hours on Friday, the USD/JPY pair surged to around 155.50, buoyed by renewed demand for the US Dollar (USD). However, cautionary remarks from Bank of Japan (BOJ) Governor Kazuo Ueda could temper the Japanese Yen‘s (JPY) downside in the near term.
San Francisco Fed President Mary Daly’s recent statement regarding the Federal Reserve’s approach to inflation has influenced market sentiment. Daly suggested a prolonged timeline for inflation to reach its target, aligning with sentiments expressed by other Fed officials this week. These inclinations towards maintaining current interest rates longer may bolster the Greenback and offer support to USD/JPY.
Expectations in financial markets point towards the Federal Reserve maintaining its current policy stance for the remainder of the year, seeking greater confidence in inflation dynamics. Federal Reserve Chair Jerome Powell underscored the potential for a prolonged timeline to achieve this confidence, indicating a supportive backdrop for USD/JPY.
Conversely, BOJ Governor Kazuo Ueda’s hawkish stance on Thursday indicated a cautious approach towards the recent weakness in the JPY. This sentiment suggests a potential uptick in short-term borrowing costs, bolstering the JPY and dampening the USD/JPY pair.
Furthermore, verbal intervention from Japanese authorities, such as Finance Minister Shunichi Suzuki’s recent comments, signals a commitment to address foreign exchange dynamics if necessary, likely imposing limitations on the pair’s upward movement in the immediate future.
