Home Business NewsBusinessBanking News USD/JPY: Prepares to test 156.00 after the Bank of Japan’s summary of views

USD/JPY: Prepares to test 156.00 after the Bank of Japan’s summary of views

9th May 24 2:11 pm

The USD/JPY pair is trading positively for the fourth consecutive day around 155.90 during Thursday’s session.

However, fears of further intervention by the Bank of Japan (BoJ) are likely to rule out a return to Japanese yen (JPY) depreciation at the moment.

The members of the Bank of Japan’s board decided to keep the key interest rate unchanged at 0% at the April monetary policy meeting.

According to the Bank of Japan’s summary of views, the board members leaned towards a hawkish stance at the April monetary policy meeting, with many officials calling for a steady interest rate to avoid the risks of inflation overshooting.

The statement highlighted recent comments made by Bank of Japan Governor Kozo Oyida, suggesting the possibility of multiple interest rate hikes in the coming months, along with the potential for an increase in short-term borrowing rates.

Yesterday, Masato Kanda, a senior Japanese currency diplomat, made verbal interventions, stating that he would take appropriate action if necessary to prevent the Japanese yen from falling. However, Kanda refused to comment on currency market interventions. In my opinion, the possibility of further steps by Japanese authorities to prevent their currency from depreciating may strengthen the Japanese yen and limit the medium to long-term upward trend of the pair.

On the other hand, I believe the monetary policy divergence between the United States and Japan continues to support the dollar/yen pair. Federal Reserve Bank of Boston President Susan Collins stated on Wednesday that the interest rate is likely to remain high for longer, as it will take longer than previously thought to lower inflation to the 2% target.

In my view, the hawkish statements from Federal Reserve officials are supportive of the US dollar and contribute to the pair’s rise. Apart from this, traders will monitor the preliminary University of Michigan Consumer Confidence Index tomorrow, Friday, which is expected to decrease to 76.0 in May from 77.2 in April, potentially causing some volatility in the pair’s movement.

The Bank of Japan made significant efforts not to confirm or deny separate interventions in the currency last week, but market participants and investors pointed out that the Bank of Japan’s market operations may have exceeded estimates significantly. Also, spending on various financing operations exceeded about nine billion yen in the first half of last week, which could support the Japanese currency.

The economic calendar remains relatively weak for the rest of this week, with dollar/yen traders looking forward to a new round of inflation figures from the United States next week, as well as the latest gross domestic product growth figures in Japan scheduled for early release next Thursday.

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