- USD/JPY is eyeing 134.50 as BoJ Ueda has reiterated the need for keeping monetary policy expansionary.
- BoJ Ueda believes that Japan’s inflation will peak sooner amid various catalysts.
- March’s US Durable Goods Orders data is expected to expand by 0.8% vs. a contraction of 1.0%.
The USD/JPY pair is making efforts for recapturing the immediate resistance of 134.50 in the Tokyo session. The major has got strength as new Bank of Japan (BoJ) Governor Kauo Ueda has reiterated the need for keeping monetary policy expansionary. BoJ Ueda is strongly supporting the continuation of the decade-long ultra-loose monetary policy on the expectation that Japan’s inflation will peak sooner.
BoJ Governor claimed that the impact of higher imported prices has passed on to households more than expected. Also, Japan’s property prices are not expected to get excessively overvalued. An absence of any trigger for Japan’s inflation might result in softening in the upcoming period. BoJ Ueda has refrained from defining the time period required for tweaking Yield Curve Control (YCC).
Meanwhile, S&P500 futures are continuously adding losses in the Asian session as anxiety among investors is soaring. As quickly as the quarterly result season is picking up pace, investors are getting more stock-specific, portraying a cautious market mood.
The US Dollar Index (DXY) has stretched its recovery above 101.80 as upbeat preliminary S&P PMI data released last week has strengthened the need of more rate hikes from the Federal Reserve (Fed). Going forward, the United States Durable Goods Orders data will be keenly watched. March Durable Goods Orders data is expected to expand by 0.8% vs. a contraction of 1.0%. An upbeat Durable Goods Orders data will indicate strong forward demand, which could propel the need for labor further.
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The USD/JPY pair is aiming to surpass the 134.50 handle as Bank of Japan (BoJ) Governor Haruhiko Ueda warned on Monday that Japan’s Consumer Price Index (CPI) might reach its peak soon.
The USD/JPY exchange rate surged recently after Mr. Ueda commented on Japan’s economic landscape for Reuters. He pointed out that the positive effects of increased government spending, weak yen, and the global economic recovery is resulting in higher inflation, but noted that downside risks remain; mainly due to the potential impacts from the COVID-19 pandemic and a further increase in supply costs.
The Bank of Japan’s country director highlighted that inflation has already started to cool off compared to earlier this year and is likely to peak in the next few months. This comes as no surprise, as Japan’s CPI recently increased by 0.4%, the highest it has been since similar gains in April 2018.
Based on Governor Ueda’s remarks and the recent data, the USD/JPY pair appears to have a strong chance of surpassing the crucial 134.50 level. The Japanese currency has been on a consistent decline against the US dollar since the middle of 2018 and analysts believe that the recent macroeconomic and political developments could provide further support for the USD/JPY.
Furthermore, the current rally in the pair has been further fueled by increasing demand for higher-yielding and riskier assets, as investors bet on a potential global economic recovery.
In conclusion, given the recent comments from the Bank of Japan Governor and the underlying bullish market sentiment, USD/JPY is likely to surpass the 134.50 handle in the near term.