The USDJPY currency pair was trading up 172.3 pips (1.24%) as the US dollar clawed back some of Thursday’s and Friday’s losses following weak US core and headline inflation data. The weak inflation data gave market participants hope that the US Federal Reserve would tame its rate hikes starting in December.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.
Today’s rally was expected given the pair’s sudden cash that saw it trade at lows last seen on September 1, 2022. The Japanese yen has fallen massively against the US dollar this year. The Bank of Japan maintained its ultra-loose monetary policies as other central banks led by the Fed implemented tighter monetary policies.
The Bank of Japan today said it is monitoring the downside and upside risks to the yen ahead of the latest Japanese GDP growth rate for Q3. The preliminary GDP data is scheduled for release later tonight at 23:50 GMT.
The BoJ will pay close attention to the GDP data, which should inform its next steps. However, the bank reiterated its commitment to supporting the Japanese economy via easing policies as it recovers, with its primary concern being strong wage growth.
Analysts expect the Japanese economy to expand by 0.3% quarterly in Q3, marking a significant decline from the 0.9% growth notched in Q2. However, the BoJ continues to prove that it does not believe that every good idea reaches a point where it starts generating diminishing returns.
The BoJ has maintained easy monetary policies for the past two decades, but many experts contend that the Japanese economy has never recovered from the crash of the early 1990s.
Today’s rally in the USDJPY currency pair was also driven by hawkish comments from Fed policymaker Christopher Waller who said that investors should not read too much into last week’s inflation report since it was just one data point.
Waller confirmed that the Fed remained committed to lowering inflation to 2%, indicating that more rate hikes were coming. However, many now expect future rate hikes to be smaller than its current 0.75% hikes.
*This is not investment advice.
USDJPY price chart.
The USDJPY currency pair was trading up 172.3 pips (1.24%) as the US dollar rallied against the yen.
