Recoveries All the Way

The currency pair of the US dollar and the Japanese Yen drew some aggressive set of bids in the course of the earlier European session and the pair climbed rapidly over the 126.00 benchmarks which has not been the case as far back as May of 2002.

After the price movement of two days that occurred on Tuesday, the currency pair of the US dollar and Japanese yen reclaimed their positive consolidation in the early part of Wednesday’s trading and it was boosted by the coming together of several factors. 

USD/JPY price chart. Source TradingView

The good-looking recovery that overtook the market’s risk sentiment, as exemplified by the broad-based happy mood across stock markets, played an undermining role on the Japanese Yen as a safe-haven asset. This and the widening divergence in policy between the US Federal Reserve’s outlook and that of the Bank of Japan added to diverting funds away from the Japanese yen.

As a matter of fact, Federal Reserve Governor Lael Brainard announced on Tuesday that the central bank is going to go ahead with quite a number of increases in interest rates and that there will be conscious efforts to reduce its balance sheet. The governor’s statement came after the publication of the American consumer price inflation data that gave no signals of it being reduced in the month of March and further escalated to levels that had not been seen since 1981.

The hawkish position of the Federal Reserve ushered the US dollar up to a high point of almost two years and it subsequently became a tailwind to the pair of the US dollar and Japanese yen.

Japanese Soft Policy to Continue

Whereas in Japan, on the other hand, the Governor of the Bank of Japan, Haruhiko Kuroda, reaffirm the bank’s commitment to go ahead with its easy monetary policy so it could be supportive of the country’s economic recovery. It became a major factor supporting the latest sudden increase that has been seen while it took along with it some stops close to 125.75 and 125.85 areas, which were the initial year-to-date and peak reached in 2015 respectively.

Therefore, the impetus might also be linked to the technology purchases that occurred and it calls for caution on the side of bullish traders as there are conditions of over-buying. Market players are now watching out for the economic docket in the US which is to feature the publication of the PPI later in the North American session.