BOJ uncertainty to cap Japanese Yen gains against USD
The Japanese Yen (JPY) attracted fresh buying on Tuesday, which, along with a subdued US Dollar (USD) price action, dragged the USD/JPY pair to the 154.00 level during the Asian session.
Speculations that the Japanese authorities could intervene to prop up the domestic currency, along with geopolitical risks, turned out to be key factors supporting the JPY as a safe-haven. Meanwhile, lower US Treasury bond yields kept the USD investors on the defensive, which further benefitted the lower-yielding JPY.
That said, uncertainty over the timing of the next interest rate hike by the Bank of Japan (BOJ) and the prevailing risk sentiment should cap any meaningful upside for the JPY.
Further, expectations that the much-touted US President-elect Donald Trump’s policies will be inflationary and limit the scope for further interest rate cuts by the Federal Reserve (Fed) should act as a tailwind for the US Treasury yields. This in turn benefits the USD strength and might help limit the downside for the USD/JPY pair.
Source: FXStreet