Japanese Yen Fluctuates as BoJ's Hawkish Bets Clash with Political Uncertainty and USD Recovery
The Japanese Yen (JPY) fluctuated within a narrow trading range against the US dollar during the Asian session on Wednesday amid mixed fundamental signals. Expectations that domestic political uncertainty could give the Bank of Japan (BoJ) more reason to slow down interest rate hikes, coupled with upbeat market sentiment, weakened the JPY's position as a safe-haven asset. Furthermore, a modest overnight recovery in the US Dollar (USD) on Tuesday helped the USD/JPY pair reverse its intraday decline back near its August monthly swing low.
However, JPY market participants appeared reluctant to place aggressive bets amid growing acceptance that the BoJ will stick to its policy normalization path. Conversely, the US Federal Reserve (Fed) is expected to resume its rate-cutting cycle next week, which could be a headwind for the USD. Furthermore, divergent BoJ-Fed policy expectations could benefit the lower-yielding JPY and contribute to a cap on the USD/JPY pair. Traders may also choose to stay on the sidelines ahead of the release of the US Producer Price Index (PPI) on Wednesday.
Source: FXstreet
