Yen Weakens, USD/JPY Approaches 158, Japanese Intervention in Focus
The Japanese yen weakened as the US dollar strengthened, pushing USD/JPY back up and trading around 159.40 during Tuesday's Asian session. However, the pair's gains are considered limited as the market weighs the possibility of Japanese government intervention to curb the yen's weakening.
Japanese Finance Minister Satsuki Katayama said financial market volatility is increasing and the government is ready to respond if necessary, including in the foreign exchange market. This statement reinforces the signal that authorities may act if the yen's movements are deemed too rapid or inconsistent with fundamentals.
On the monetary policy front, Bank of Japan Governor Kazuo Ueda stated that core inflation is gradually moving toward its 2% target. He added that the BoJ will guide policy appropriately to achieve stable and sustainable inflation, although the market expects interest rates to be held at 0.75% on Thursday, with the option of further tightening remaining open.
The strengthening of the US dollar occurred as expectations of an imminent Fed rate cut faded. Inflation concerns related to the surge in oil prices due to the conflict in the Middle East have also reduced the scope for policy easing, supporting the dollar and pressuring lower-yielding currencies like the yen.
The market widely expects the Fed to hold its benchmark interest rate in the 3.50%–3.75% range at its Wednesday meeting, according to the CME FedWatch Tool. If the rate remains unchanged, it would be the second consecutive rate cut after the previous easing cycle, while market focus remains on the combination of the central bank's policy direction and potential moves by Japanese authorities in the foreign exchange market. (asd)
Source: Newsmaker.id
