- USD/JPY extends losses on the likelihood of reaching the BoJ’s inflation target.
- BoJ members discussed the potential implementation of measures if a positive cycle of wages and inflation is confirmed.
- The US Dollar could face challenges on expectations of the Fed’s initiating rate cuts from June.
USD/JPY continues its decline, nearing 151.20 during the Asian session on Monday. This movement follows the release of the Bank of Japan (BoJ) Minutes from the January policy meeting. BoJ Board members acknowledged an increasing likelihood of reaching the central bank’s inflation target, albeit gradually.
Furthermore, members discussed the possibility of measures if a positive cycle of wages and inflation is confirmed. Some policymakers noted that the risk of inflation significantly exceeding expectations has diminished.
Moreover, the Japanese Yen (JPY) may receive support from potential forex intervention. Japan’s top currency diplomat, Masato Kanda, issued a warning, stating his intention to take appropriate action to address excessive JPY weakness, without ruling out any measures.
The US Dollar Index (DXY) weakens despite higher US Treasury yields. However, the US Dollar (USD) saw a sharp rise following hawkish remarks from Federal Reserve Bank of Atlanta President Raphael Bostic on Friday. Bostic revised his earlier forecast of two interest rate cuts this year, now expecting only one, citing persistent inflation and stronger-than-expected economic data.
Nonetheless, the USD may encounter downward pressure on expectations for the initiation of a Federal Reserve easing cycle, anticipated to start in June. Despite higher inflation readings, the Federal Reserve has downplayed concerns, with Chairman Jerome Powell assuring markets that the central bank will not hastily react to two consecutive months of increased inflation figures.
