- The Japanese Yen made a significant surge, reaching its highest level in four months against the US Dollar on Thursday, following Bank of Japan (BoJ) Governor Kazuo Ueda’s comments about a potential shift away from negative interest rates.
- Ueda’s remarks raised hopes that the BoJ will start to unwind its ultra-dovish policies in 2024, leading to a sharp pullback in the USD and causing the USD/JPY pair to drop to its lowest level since August.
- However, Ueda also emphasized the need to maintain loose monetary policy in the near term, as signs of a cooling Japanese economy were reinforced by a downward revision to Japan’s third-quarter GDP print.
Despite this, the USD found support from a rebound in US Treasury bond yields, helping the USD/JPY pair to attract buyers and recover from its intraday losses heading into the European session.
Traders are cautious, though, as it is widely believed that the Federal Reserve (Fed) will begin to reduce its policy in the first half of 2024. With the release of the influential US Nonfarm Payrolls (NFP) report looming, significant movements in the USD/JPY pair are unlikely, and the pair is on track to register heavy losses for the third consecutive week.
Daily Digest Market Movers: Japanese Yen loses favorable traction versus USD amidst some rearranging ahead of United States NFP report
- The Japanese Yen recorded its biggest one-day rally against the US Dollar on Thursday in response to Bank of Japan Governor Kazuo Ueda’s slightly hawkish messaging about ending the ultra-loose monetary policy.
- Ueda highlighted the spring wage negotiations as a potential turning point in policy and indicated that the central bank will assess whether wages will increase sustainably and whether wage hikes will raise business prices.
- Despite this, Ueda also stated that they have not reached a scenario where they can achieve the price target sustainably, stably and with sufficient certainty, and noted that stimulus measures are still supporting the Japanese economy.
- However, the disappointing domestic data released on Friday, showing a 2.9% year-on-year contraction in Japan’s economy in the third quarter, worse than the initial estimate of a 2.1% drop, provided some support to the USD/JPY pair on Friday.
- On a quarterly basis,
