USD/JPY Remains Below 160.50 After Retreating From 38-Year Highs

Yen, Money, Wealth, Japanese Yen

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  • USD/JPY corrects due to the verbal intervention by Japanese authorities.
  • Japanese Finance Minister Suzuki stated to take appropriate steps on excessive FX moves.
  • The US Dollar may limit its downside due to higher yields.

USD/JPY trades around 160.40 during the Asian session on Thursday after retreating from 160.87, the highest level since 1986. This downward correction could be attributed to the verbal intervention by Japanese authorities.

Japanese Finance Minister Shunichi Suzuki stated on Wednesday that he "will take appropriate steps on excessive FX moves." Suzuki refrained from commenting on specific forex levels or potential interventions but emphasized the importance of currencies moving in a stable manner that reflects fundamentals. Chief Cabinet Secretary Yoshimasa Hayashi echoed similar sentiments as the Finance Minister.

The US Dollar (USD) depreciates possibly due to traders’ anticipation of Friday’s Core PCE Price Index inflation, projected to decrease year-over-year to 2.6% from the previous 2.8%. This data is seen as the Federal Reserve's (Fed) preferred inflation gauge. Market participants are hoping that signs of easing inflation will encourage the Federal Reserve (Fed) to consider rate cuts sooner rather than later.

However, the downside of the Greenback could be limited due to higher yields on US Treasury bonds. 2-year and 10-year yields stand at 4.74% and 4.33%, respectively, by the press time.

Reuters cited Fed Governor Michelle Bowman repeating her view on Tuesday that holding the policy rate steady for some time will likely be enough to bring inflation under control. Meanwhile, Fed Governor Lisa Cook said it would be appropriate to cut interest rates "at some point," given significant progress on inflation and a gradual cooling of the labor market, though she remained vague about the timing of the easing.

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