USD/JPY has posted considerable gains on Thursday, erasing the losses which marked the Wednesday session. In North American trade, USD/JPY is trading at 107.32, up 0.49% on the day. On the release front, there are no Japanese events on the schedule. In the US, unemployment claims dropped to 233 thousand, very close to the estimate of 231 thousand. On Friday, the US releases the UoM Consumer Sentiment report.
Tensions in the Middle East are growing by the hour, but investors haven’t thrown in the towel and snapped up the safe-haven Japanese yen, at least just yet. However, the markets are casting a worried eye on Syria, which is bracing for a US strike. US President Trump has promised to punish the Syrian regime for an alleged chemical attack by government forces last weekend. For its part, Russia has countered that it will respond to any US move against Syria. Relations between the US and Russia could deteriorate if Trump makes good on his promise, and investor risk appetite could sink and boost the Japanese currency.
The Federal Reserve minutes had a generally hawkish tone and this helped support the US dollar. All of the Fed policymakers indicated that the US economy would continue to improve and that inflation would rise in the next few months. At the March meeting, the Fed unanimously voted to raise rates by a quarter-point, bringing the benchmark rate to a range between 1.50% and 1.75%. The Fed projection for rate policy in 2018 remains at three hikes, although there is speculation that the Fed could revise the forecast to four rate hikes. Last week, Fed Chair Jerome Powell said that the Fed would likely continue to raise rates in order to keep a lid on inflation, but added that the rate moves would be gradual. A new headache for the Fed is the escalating trade battle between the US and China, which could hurt the economy and raise consumer prices. As for the next two rate meetings, the markets expect Powell & Co. to sit tight in May and raise rates at the June meeting.