USD/JPY looks strong above 110.80 amid strong USD
|- USD/JPY remains on strong foot on Thursday.
- Higher US Treasury yields underpin the demand for the US dollar.
- Yen remains sidelined ahead of the BOJ interest rate decision this week.
The strong buying sentiment in the US dollar pushes, USD/JPY to a multi-month high. The pair rose to 110.74 after reaching the low of 109.81 comprising a move of almost 100-pips.
At the time of writing, USD/JPY trades at 110.73, up 0.03% for the day.
The move was primarily sponsored by the strong buying pressure in the US Dollar. The US Dollar Index( DXY), which measures the performance of the greenback against its six major rivals, appreciated 91.39 with 0.95% gains. The Levels were last seen in early May.
The Fed on Wednesday kept the rates on hold as expected. However, the central bank raised the inflation forecast very sharply with the forward guidance on the time to work on it. The Policymakers signaled two increases by the end of 2023. This, in turn, added to the demand for the US dollar.
The US Treasury yields rose to 1.54% on Wednesday, after the Fed raised its forecast on the Personal Consumption Expenditure (PCE) inflation to 3.4% in 2021, much higher than 2.4% from the March projections.
The upbeat economic outlook fueled by the massive stimulus plan and the strong vaccination drive led to a robust economic recovery. However, the Fed did not indicate the timing of tapering measures.
Meanwhile, the new economic forecast is highly optimistic, showing Gross Domestic Product (GDP) will grow at 7% in 2021, above 6.5% in the March projection.
On the other hand, the Japanese yen remains pressurized as investors increase their investment in the US dollar. The Bank of Japan (BOJ) said that it will extend its pandemic-relief programs to support a fragile economic recovery.
Meanwhile, the Japanese Reuters Tanken index in Japan rose to 1 point in June from the 21 in the previous month.
The growth differentials in the US and Japan weigh on the prospects of the yen.
As for now, investors are waiting for the US Initial Jobless Claim data to gauge the market sentiment.
USD/JPY additional levels
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