The USD/JPY currency pair is experiencing selling pressure, trading around 153.70, its lowest level in three months, during the early Asian session on Thursday. The Japanese Yen (JPY) is receiving temporary support from growing speculation that the Bank of Japan (BoJ) will lower interest rates in the upcoming week.
The BoJ is expected to discuss the possibility of raising interest rates and may introduce a plan to significantly reduce bond purchases in the near future. Commerzbank FX strategist Antje Praefcke noted, “Ahead of the BoJ’s interest rate decision next week, increasing numbers of analysts anticipate that a rate hike could occur sooner rather than in September. It will also be noteworthy to see if the BoJ addresses its bond purchases and considers gradual reductions.” Furthermore, potential foreign exchange interventions by Japanese authorities could limit the upside potential for the USD/JPY pair.
In the United States, mixed economic signals are putting additional pressure on the USD. The US S&P Global Composite PMI increased to 55.0 in July from 54.8 in June, while the S&P Global Manufacturing PMI fell to 49.5 from 51.6, falling short of the market consensus of 51.7. On the other hand, the Services PMI improved to 56.0 from 55.3, exceeding the expected 54.4. These mixed signals, combined with a dovish stance from the Federal Reserve, are contributing to the selling pressure on the USD.
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