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USDJPY News - The USD/JPY currency pair weakened for two consecutive days on Friday, trading around 150.60 during the Asian session. Down less than 0.10% for the day, the pair remains above the previous low.
The US Dollar (USD) continues to struggle to recover, approaching its lowest level since September 1, reached on Tuesday. This is due to the dovish outlook from the Federal Reserve (Fed). Market participants are convinced that the Fed will not raise interest rates again and anticipate a possible rate cut in May 2024. This belief is supported by weak US consumer inflation figures and Initial Jobless Claims data showing a weakening labor market.
The decline in crude oil prices is also expected to have disinflationary effects, bringing the Fed closer to its 2% target and weakening the dollar. A weaker risk environment benefits the Japanese yen (JPY) as a safe-haven asset, putting pressure on the USD/JPY pair. However, the negative impact is limited as the Bank of Japan (BoJ) remains dovish.
BoJ Governor Kazuo Ueda emphasized the BoJ's ultra-loose monetary policy, stating that the central bank will remain patient as there is still no confidence that the 2% inflation target will be consistently achieved.
Ueda indicated that inflationary pressures caused by cost factors are likely to dissipate, and inflation trends in Japan are expected to gradually increase towards 2% by the fiscal year 2025. This will limit JPY's gains, restraining traders from aggressively speculating on a bearish outlook for the USD/JPY pair.
Next, traders are awaiting US housing market data – Building Permits and New Housing – during the early North American session. The speech by Chicago Fed President Austan Goolsbee and US Treasury yields will also impact USD prices.
Along with global risk sentiment, this will affect short-term opportunities this weekend. Nevertheless, the USD/JPY pair remains on track for a weekly decline, reversing much of the gains from the previous week, approaching the highs of October 2022.
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