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Japanese Yen Benefited from U.S. Dollar Weakness

The Japanese yen rose over 149.000, reaching its highest level in over five weeks, driven by overall weakness in the U.S. dollar. Now, the market doesn’t expect rate hikes from the Federal Reserve. Expectations shifted towards a more dovish policy by the regulator, so investors believe rate cuts will come in May 2024.

Possible effects for traders

Recent data revealed that Japan’s economy shrunk more rapidly than anticipated in Q3 as the global demand declined and domestic inflation increased. The Bank of Japan (BOJ) repeated its dedication to continuing its current loose monetary policy, implementing only minor modifications to its yield curve control measures. The BOJ adjusted its approach to the 10-year Japanese government bonds, designating 1% as a flexible ‘upper bound’ instead of a strict limit. The regulator also said it wouldn’t defend this level via unlimited bond purchases.

USDJPY declined during the Asian trading session but grew in the early European trading hours. Today, the formal macroeconomic calendar is uneventful for the pair. This week, investors will focus on upcoming preliminary manufacturing and services PMI figures and inflation data from Japan, which will provide insights into the country’s economic state and possible changes in the monetary policy.

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