- The Japanese Yen (JPY) made significant gains, reaching a more than two-month high against the US Dollar (USD) on Wednesday. However, a bounce back by the USD and remarks from Bank of Japan (BoJ) board member Seiji Adachi trimmed some of the gains.
- Adachi indicated that it is premature to discuss an exit from the ultra-easy monetary policy and this, coupled with a modest USD bounce, helped the USD/JPY pair to recover from its lowest level in nearly three months.
- Meanwhile, less hawkish comments from Federal Reserve (Fed) officials led to expectations of an early interest rate cut in 2024 and caused a decline in US Treasury bond yields. This may cap any significant upward movement for the USD and the USD/JPY pair, prompting caution among traders.
The release of the prelim US Q3 GDP print and speeches by influential FOMC members are expected to provide further direction for the market. Additionally, the release of the US Core PCE Price Index will be closely watched for the Fed’s preferred inflation gauge.
On the other hand, remarks from BoJ’s Adachi highlighted that Japan is yet to see a positive wage-inflation cycle and that the central bank will maintain its current easy policy. These comments affected the Japanese Yen and allowed the USD/JPY pair to bounce back from a multi-month low, although expectations of a dovish Federal Reserve continue to limit further gains.
