Just a Little Dip

The USD/JPY currency pair has continued to lose more of its position while the mid-European session was on course, and it dipped to a new daily low point in the vicinity of 127.60 area about an hour before this was put together, only to recover just a few points afterward.

USD/JPY price chart. Source TradingView

The currency pair saw a turnaround in its intraday growth from a new high point of 20 years which it touched in the early hours of Wednesday and it has now drawn back by about 180 pips away from the 129.40 area. The public anticipation that officials of the Bank of Japan were not comfortable with the turn of events and were set to come up with appropriate responses to the fall of the Japanese Yen pushed market players to take off some profits from the table after the latest parabolic ascent of the USD/JPY pair.

The Finance Minister of Japan, Shunichi Suzuki, gave the most direct warning statement on Tuesday that the damage incurred by the economy through the weakness of the Yen as things are is far greater than any benefit that might have come from it. In addition, the Governor of the Bank of Japan, Haruhiko Kuroda, who usually advocates for weaker currencies, has equally accepted that much decline in the value of the Yen would adversely affect the Japanese economy.

Bearish Traders Following the Pullback Trend

Bears are taking a cue from the average pullbacks in the US Treasury bond yield which has caused a corrective drop in the US dollar from its most significant high point since March 2020. In spite of the negative factors that have accompanied the dollar, the slide seems to have been cushioned in the midst of the wide divergence between the policies of the Bank of Japan and the Federal Reserve. This also served as an intervention mechanism in the market to put a check on the rising ten-year Japanese yield.

The Bank of Japan set out to buy endless amounts of the government bond in order for it to defend the 0.25% bond yield capitalization. Meanwhile, the bank has over time, stated its readiness to use strong tools in its possession to ward off any interest rates that would be in the long-term, and stop them from rising so much. 

The US Federal Reserve, on the other hand, is set on curbing inflation by increasing interest rates and tightening monetary policies by any means necessary.