The USD/JPY pair maintained its position near 159.00 during Friday’s Asian session, extending gains over six consecutive trading sessions. Investors anticipate further upside towards a multi-year high around 160.00, driven by expectations that the Bank of Japan (BoJ) may postpone plans to reduce bond-buying beyond the July meeting.
In its recent monetary policy meeting, BoJ Governor Kazuo Ueda announced a delay in plans to trim bond purchases and increase interest rates further, citing concerns over inflation expectations amid a persistently weak Japanese Yen. The yen’s depreciation has bolstered competitiveness for Japanese exports globally but also escalated import costs, potentially leading to inflationary pressures.
However, the latest data on Japan’s National Consumer Price Index (CPI) for May presented a nuanced picture. The core CPI, excluding food and energy, moderated to 2.1% from the previous 2.4%, indicating some stabilization. Meanwhile, the National CPI excluding Fresh Food showed a slower growth pace of 2.5%, slightly below expectations but higher compared to the prior release of 2.2%.
On the other side, the US Dollar (USD) retreated slightly to 105.50 against the Japanese Yen but retained overall strength. This resilience comes as market participants anticipate the Federal Reserve (Fed) to lag behind other central banks in moving towards policy normalization. Despite the Fed signaling only one rate hike this year, financial markets project two rate increases, with policy adjustments potentially beginning as early as the September meeting.
Looking ahead, market focus shifts to the release of US S&P Global PMI data for June at 13:45 GMT. Analysts expect a decline in the Composite PMI, reflecting weakness in both the manufacturing and service sectors, which could influence further USD/JPY movements.
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