The hawkish preference implemented by the Federal Reserve has changed the narrative and created a more favorable environment for the US Dollar, especially against low-yielding currencies such as the Japanese yen. In its June monetary policy decision, the FOMC left its benchmark interest rate and quantitative easing (QE) program unchanged but signaled two rate hikes for 2023 amid rising inflationary pressures and optimism about the state of the recovery. In the press conference, the bank also stated that preliminary discussions on reducing its bond-buying program had begun, although it stressed that the conversation was at an early stage and that more inroads toward “substantial further progress” were needed before advancing the debate.
The hawkish change by the central bank prompted a rally in nominal rates, lifting the US 2-year treasury yield roughly 9 bps above 0.2%, its highest level in 12 months. The US 10-year yield also jumped, although the move has since reversed. The rate repricing provoked an initial strong bullish move in the USD/JPY, pushing its price to 110.82, the highest mark since last April. Today, however, the pair has retraced some of the Fed-induced gains but remains biased to the upside considering the latest developments.
At this time the USD/JPY pair trimmed most of its post-Fed gains but holds above the 110.00 support price.
On the data front, Japan released bond investment figures, which usually has no impact on price action and earlier Today, Japan published the May National inflation, foreseen at -0.7% YoY. Moreover, the Bank of Japan announced the result of its monetary policy meeting with no change as expected.
Warning:
Trading on CFDs involves a high level of risk, including full loss of your trading funds. Before proceeding to trade, you must understand all risks involved and acknowledge your trading limits, bearing in mind the level of awareness in the financial markets, trading experience, economic capabilities and other aspects.
Disclaimer:
Market Trends, Charts, Trading Ideas or other information provided by BKFX (Pty) Ltd and/or third parties are not intended as an investment advice and/or recommendation. The information provided is not presented as suitable or based on your specific need. You are responsible for your own investment decisions and you should not trade with money you cannot afford to lose. Any views or opinions presented in this Article are solely those of the author and do not necessarily represent those of the Company, unless otherwise specifically stated. The Company may provide the general commentary which is not intended as an investment advice and must not be construed as such. Seek advice from a separate financial advisor if an investment advice is needed. The Company assumes no liability for errors, inaccuracies or omissions, inaccuracies or incompleteness of information, texts, graphics, links or other items contained within this article/material.