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12/09/24
20
USD/JPY Faces Renewed Selling Pressure Amid BoJ Comments and US Inflation Dynamics
The USD/JPY currency pair is experiencing renewed selling pressure after previously inching up towards the 143.00 level. Recent comments from a Bank of Japan (BoJ) board member, which hinted at a prolonged period before any change to the current monetary policy, have added strength to the Japanese Yen (JPY) and contributed to the decline in the USD/JPY pair. While there has been a modest increase in demand for the US Dollar (USD) and an overall positive market sentiment providing some support, these factors have not been enough to maintain the intraday gains.
Currently, USD/JPY is trading in the mid-143.00s, reflecting a halt in its recovery from a nearly nine-month low hit just days ago. There is a perception that the pair remains susceptible to extending its existing downward trend, which has been apparent over the last two months. Despite signs of easing consumer prices in the US, core inflation metrics indicate persistent underlying pressure, suppressing speculation for a larger 50 basis point rate cut from the Federal Reserve in the near term.
The JPY faced additional pressure following a surprising 0.2% drop in Japan’s Producer Price Index (PPI) for August. The yearly rate also fell more than expected to 2.5%, down from 3.0% in July. Although these developments cast a shadow over the JPY, the comments from BoJ Governor Naoki Tamura suggesting that a transition away from loose monetary policy will take time have tempered the currency’s losses. Market participants are now bracing for a 25 basis point rate cut from the Fed in their upcoming meeting, a move that highlights the disparity between US monetary policy and the BoJ’s current stance.
As traders pivot their focus to the upcoming release of the US Producer Price Index (PPI) for fresh market direction, the prevailing economic conditions suggest that the outlook for USD/JPY may favor further declines.
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