Yen Weakens Ahead of BoJ
The Japanese yen weakened for a second day on Thursday, retreating from its strongest level since July 7. The strengthening of the US dollar after the Fed meeting and a more risk-on market mood dampened interest in safe-haven assets like the yen.
Domestic political uncertainty fueled concerns that the Bank of Japan (BoJ) could delay an interest rate hike. Weaker-than-expected Core Machinery Orders data added to the pressure on the yen.
However, traders tended to refrain from aggressive positions until the BoJ's two-day meeting results were announced on Friday. The consensus is that the BoJ remains on a gradual normalization path—in contrast to the Fed, which is now more dovish.
These differing policy directions have the potential to limit yen weakness, but the US dollar's recovery from its lowest level since 2022 could still support USD/JPY. The next direction will be determined by the BoJ's guidance on inflation, growth, and the timing of the next interest rate hike.
Key points:
The JPY weakened for a second straight day; the USD recovered post-Fed.
Political uncertainty and weak machinery orders weighed on the yen.
Markets are in a wait-and-see mode ahead of the BoJ's decision on Friday.
BoJ normalization vs. Fed dovishness → limits JPY weakness, supports USD/JPY.
Source: Bloomberg.com
