Japanese Yen trims part of intraday losses against USD amid hawkish BoJ expectations
The Japanese Yen (JPY) remains depressed against its American counterpart through the Asian session on Thursday, though the downside remains cushioned amid rebounding Japanese government (JGB) bond yields. Investors seem convinced that the Bank of Japan (BoJ) will hike interest rates further amid broadening inflation in Japan. This overshadows BoJ Governor Kazuo Ueda's comments last week about potentially increasing regular bond buying and triggers a fresh leg up in JGB yields, which, in turn, is seen underpinning the JPY.
However, concerns over US President Donald Trump's tariff plans and a positive risk tone might hold back bulls from placing fresh bets around the JPY. Apart from this, a modest US Dollar (USD) strength, bolstered by a pickup in the US Treasury bond yields, assists the USD/JPY pair in holding above the 149.00 mark. Traders now look to Thursday's US macro data and speeches by influential FOMC members for some impetus ahead of key data from Japan and the crucial US Personal Consumption Expenditure (PCE) Price Index on Friday.
Japanese Yen lacks bearish conviction as hawkish BoJ expectations trigger a modest bounce in JGB yields
Bank of Japan Governor Kazuo Ueda said last week the central bank was ready to increase government bond buying if long-term interest rates rise sharply, dragging Japanese government bond yields away from a more-than-a-decade high.
In fact, the yield on the benchmark 10-year JGB touched its lowest level since February 12 and undermined the Japanese Yen, pushing the USD/JPY pair back closer to mid-149.00s during the Asian session on Thursday.
Japan’s inflation accelerated at the fastest pace since the summer of 2023 in January and keeps the Bank of Japan on track to raise its benchmark interest rate further, which might hold back traders from placing aggressive JPY bearish bets.
US President Donald Trump ordered an investigation on copper imports to assess whether tariffs should be imposed due to national security concerns. Trump also confirmed that tariffs on Canada and Mexico are "on time and on schedule".
Trump has already raised tariffs on goods from China and threatened new reciprocal tariffs for each country. Furthermore, Trump said on Wednesday that his administration will soon announce a 25% tariff on imports from the European Union.
Bets for more interest rate cuts by the Federal Reserve are on the rise amid the recent downbeat US macro data, which pointed to a cooling economy and fueled worries about the growth outlook. This keeps the US Dollar bulls on the defensive.
Atlanta Fed President Raphael Bostic said on Wednesday that inflation has seen a lot of progress, though is still high and the US central bank should hold rates where they are, at a level that continues to put downward pressure on inflation.
Investors now look forward to a slew of key economic reports from Japan, due on Friday, including Industrial Production, Retail Sales, and Tokyo inflation, which could provide further clarity on the BoJ's monetary policy outlook.
Friday's economic docket also features the release of the US Personal Consumption Expenditure (PCE) Price Index – the Fed's preferred inflation gauge. This would influence the USD and provide a fresh impetus to the USD/JPY pair.
Source: Fxstreet
