September 25, 2023

USD/JPY Climbs Up the 119.00 Mark Steadily, Close To Multi-Year High Levels

Central Banks Pulling Strong Weights

The USD/JPY currency pair incidentally stepped back a bit but was still in close proximity to the set multi-year height while the early European session was on, and it is currently aiming to consolidate further on the momentum it had gathered beyond the 119.00 benchmarks.

After there had been a two-day consolidative movement in price before Friday, the USD/JPY currency pair drew a new set of purchases on Friday following the announcement of policy decisions by the Bank of Japan on Friday. As many had expected, the Bank of Japan continued to stick with its friendly policy position while it also went ahead to downgrade the initial overall analysis of the Japanese economy.

USD/JPY price chart. Source TradingView

The apex bank in Japan gave warnings of potential and high economic uncertainty as a result of the ongoing crisis in Eastern Europe. The bank, therefore, stated as sufficient reason why it is keeping its monetary policy very loose at this period of time. At the press conference which followed the meeting, the Governor of the Bank of Japan, Haruhiko Kuroda, confirmed that the Bank of Japan is going to relax its policy further as needed without any hesitation.

The Fed’s Hawkish Move Might Continue

On the flip side across the Pacific Ocean, the US Federal Reserve had on Wednesday announced the beginning of its hawkish monetary policy fastening circle. Moreover, the “dot plot” showed that the Federal Reserve is likely to increase interest rates at every of its remaining six policy meetings this year as a means of fighting high inflation rates. The opposing policy position of the Bank of Japan and the US Federal Reserve has been a tailwind in the affair of the USD/JPY currency pair.

Bullish traders again took a cue from increased US Treasury bond yields. As a matter of fact, the ten-year benchmark yield of the American government bond was holding just under the highest level it had got to since June 2019. This came to be a factor that favors bullish traders and encourages the prospect of prolonging the USD/JPY pair’s latest bullish trend.

That said, the overall dovish tone surrounding the stock markets might play a significant role in driving some safe-haven funds in the direction of the Japanese yen and consequently cap some gains for the currency pair. The inability of mediators and both parties in the Russia-Ukraine conflict to reach an agreement in the peace negotiations has become a significant factor weighing on market sentiments and benefitting safe-haven assets.    

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