USD/JPY eyes a break below 136.00 as investors digest Fed’s rate hike fears, BoJ policy eyed

The USD/JPY pair is delivering a sideways performance above 136.00 in the early Asian session. The asset looks vulnerable above 136.00 and is expected to deliver a break below the same as investors have shrugged-off fears associated with expectations of bigger rates from the Federal Reserve (Fed).

Thursday’s Initial Jobless Claims data reported an 11% jump in the number of candidates claiming for the very first time. This was the highest jump in the past five months, which conveyed that the United States labor market is not tight enough as it appears to the market participants. The street believes that a mega jump in initial claims was the outcome of the mid-winter school break in New York. So it is a one-time blip and can be ignored.

The US Dollar Index (DXY) is juggling above 105.25 after a gradual correction from Wednesday’s high at 105.86. S&P500 futures witnessed an intense sell-off on Thursday as investors got distressed by high taxes proposed by US President Joe Biden on billionaires and rich investors. Citing the Budget as a blue-collar blueprint, more taxes on riches will be utilized for medical claims of retired individuals.

Squeezing fears for Fed’s blunt statement on using higher rates to bring down inflation also supported the demand for US government bonds. The alpha generated on 10-year US Treasury bonds dropped firmly to near 3.90%.

On the Japanese Yen front, investors are awaiting the interest rate decision by the Bank of Japan (BoJ) for fresh impetus. Analysts at TD Securities are of the view that “It is unlikely that the BoJ will rock the boat at this meeting even as CPI inflation hit a 41-year high. Governor Kuroda at his last meeting will likely keep policy unchanged, with further changes having to wait for incoming governor Ueda starting in April. We think the BoJ could shift the top end of the YCC band again in the months ahead, potentially as early as April.”