The USD/JPY currency pair hit a new high against the Japanese yen, extending Monday’s rebound into early Tuesday in Europe. By press time, the value of the Yen had risen to 138.80.
The safe-haven Japanese Yen (JPY) is weakened, and the USD/JPY pair is boosted due to the Bank of Japan’s (BoJ) more dovish stance and optimism about US-China ties. After inflation dropped below the BoJ’s 2% target in the middle of the fiscal year, Governor Kazuo Ueda said last Friday that tightening monetary policy in response would hurt the economy. Ueda has indicated that BoJ easing will continue until yield curve management is maintained.
Vice President Joe Biden expressed optimism during the G7 summit in Japan that relations between the United States and China will soon improve. This lowers global growth worries and depreciates the JPY. The US dollar is weakening due to Jerome Powell’s less aggressive comments as Fed chair, the unexpected breakdown of US debt ceiling discussions, and potentially discouraging USD/JPY long bets.
Powell said on Friday at a Federal Reserve research conference that it is unclear whether or not interest rates need to rise further due to uncertainty regarding previous rate hikes and current bank credit constraints. Minneapolis Fed President Neel Kashkari said on Monday he was still on the fence regarding whether or not to raise the policy rate again in June. Further, the US debt ceiling worries bring down US Treasury bond yields, which may limit USD/JPY movement.
Without US economic statistics, investors will focus on President Joe Biden’s meeting with House Republican Speaker Kevin McCarthy to discuss raising the debt ceiling. US bond yields will help the USD/JPY as well.
Trade Idea
Traders will look to the broader risk mood to locate short-term chances ahead of Tuesday’s BoJ Core CPI and flash Japan Manufacturing PMI.