- USD/JPY manages to stay firmer on Thursday after the previous session’s dramatic move.
- Hawkish Fed Chair, Dovish BOJ, risk-aversion remain key events.
- Lower US Treasury yields keep gains limited for the US dollar.
.USD/JPY seems to be exhaustive on Thursday as it trades with minute gains in the Asian session. The pair rallied near 109.90 in a more than 70-pips movement in the overnight session following the Fed’s surprising hawkish move on tapering and interest rate hike. At the time of writing, USD/JPY is trading at 109.80, down 0.01% for the day.
The move was primarily driven by the US Federal Reserve Chairman Jerome Powell view on the timeline of asset tapering and Job market condition. The central bank left the cash rate unchanged at 0-0.25% and asset-purchasing at the current $120 billion monthly pace in its September policy meeting.
The greenback jumped near to its four-week high of 93.40 after the initial negative reaction to the Fed’s policy stance. The Fed Chair reinforced that tapering would not mean a countdown to interest rate hikes despite more members favouring sooner rate hikes next year instead of 2023. The US benchmark 10-year Treasury yields dropped 1.7 basis points to 1.30% following the Fed Chair Powell comments that if the US economy continued to show signs of a recovery then the central bank would possibly be completing with the taper of its bond-buying program by the middle of 2022.
In addition to that, investors digested the threat of China’s property giant Evergrande’s risk after the property giant promised bond coupon payment to shareholders on Thursday. On the other hand, the Japanese yen depreciated against the greenback on a more hawkish Fed as compared to the Bank of Japan (BOJ) bleaker view on the economy amid the impact of the COVID-19 pandemic.
The BOJ left its key-short term interest rates unchanged at -0.1% and the target for the government bond yield at 0%. As for now, traders are waiting for the US Initial Jobless Claims, and Chicago Fed National Activity Index to gauge market sentiment.
USD/JPY additional levels
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