- USD/JPY edges higher to 155.50 in Friday’s early Asian session.
- Fed’s Daly becomes the latest Fed official to warn rates will likely stay higher for longer.
- The BoJ’s recent hawkish comments and FX intervention considerations support the Japanese Yen.
The USD/JPY pair trades on a stronger note around 155.50 on Friday during the early Asian trading hours. The renewed US Dollar (USD) demand lifts the pair. Nonetheless, the verbal intervention and the hawkish comment from the Bank of Japan’s (BOJ) Governor Kazuo Ueda might cap the downside of the Japanese Yen (JPY) for the time being.
On Thursday, San Francisco Fed President Mary Daly stated that the central bank may take more time to return inflation to its target as the uncertainty about inflation in the next few months has increased. Other Fed officials this week have also shown they favor keeping rates at their current levels for longer. This, in turn, might lift the Greenback and create a tailwind for USD/JPY.
Financial markets anticipate the US central bank to keep policy on hold for the rest of the year as it looks for "greater confidence" in inflation, and Fed’s Chair Jerome Powell emphasized that it might take longer than expected to achieve that confidence.”
On the other hand, BoJ Governor Kazuo Ueda said on Thursday that the central bank will scrutinize the JPY's recent weakness in guiding monetary policy, per Reuters. The hawkish comments have prompted the expectation of an increase in short-term borrowing costs in the coming months, which provide some support to the JPY and drag the USD/JPY lower.
Additionally, the verbal intervention from Japanese authorities is likely to limit the pair’s upside in the near term. Early Friday, Japanese Finance Minister Shunichi Suzuki said once again that he will take necessary measures regarding foreign exchange if required.
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