The USD/JPY pair trades in negative territory around 159.70 during the Asian trading hours on Thursday. The Japanese Yen (JPY) edges higher against the Greenback amid intervention fears by Japanese authorities. Markets turn cautious ahead of the Bank of Japan (BoJ) interest rate decision later on Thursday.
The Japanese central bank raised interest rates to a 30-year high of 0.75% in December and has signaled its readiness to keep increasing borrowing costs if Japan continues to progress towards durably achieving its 2% inflation target backed by wage gains. The BoJ is widely expected to maintain its benchmark rate at 0.75% during its meeting concluding on Thursday. Traders will closely monitor the BoJ's Governor Kazuo Ueda press conference for any hints about the next move.
The surge in oil prices from the Iran war could hit corporate profits and the economy with rising fuel costs. This might give Japan’s Prime Minister Sanae Takaichi's administration another reason to push back against an early rate hike, which could weigh on the JPY. Despite heightened uncertainty from the Iran war, markets see roughly a 60% probability of another rate hike in April.
On the other hand, verbal intervention from Japanese officials might cap the downside for the JPY and act as a headwind for the pair. Japan’s Finance Minister Satsuki Katayama said that recent currency moves are not in line with fundamentals, reiterating warnings of possible action by authorities. She added that she is watching financial markets with an extremely high level of vigilance.
On the USD front, the Fed held interest rates steady at its March meeting on Wednesday, maintaining the benchmark federal funds rate in a target range of 3.5% to 3.75%. The central bank signaled that it still expects one cut this year, even though traders pull back their bets for rate reductions in 2026.
Comments
Log in or sign up to join the conversation.