- The US Dollar maintains a bid tone and is testing 154.78 high.
- The Yen remains weighed by interest rate differentials between the Fed and the BoJ.
- Friday’s BoJ momentary policy statement might give a fresh impulse to the Yen.
Nothing stops the US Dollar. Neither the moderate risk appetite seen on Monday nor the reiterated intervention warnings by diverse economic authorities, the Yen remains pinned to long-term lows near 155.00.
The pair extended its recovery on Monday, following a spike lower last week, following news of the Israeli attack on Iran. Tehran downplayed the event, suggesting its will to avoid a direct confrontation with Tel Aviv, which the market has welcomed.
This has failed to give some oxygen to a battered Yen, which is struggling on carry trade dynamics. The widening yield differential between the Yen and most of the major currencies encourages speculators to borrow JPY and exchange for higher-yielding assets elsewhere.
Adverse interest rate differentials are weighing on the JPY
Last week, an unusual joint statement from the US, Japanese, and South Korean authorities pledged to act against excessive currency volatility. This had an immediate easing impact on the US Dollar, which seems to have faded on Monday.
Yen's weakness helps Japanese exporters to sell their products on foreign markets but makes imports more expensive in the domestic ones. This has an inflationary impact on prices and forces the BoJ to accelerate its normalization pace. The Japanese central bank meets on Friday, after the release of the anticipated Tokyo CPI figures. Any hint on that lion at the bank’s statement might give some fresh impulse to the Yen.
In the US, the focus will be on Thursday’s first-quarter GDP figures and Friday’s PCE Prices Index data. This is the Fed’s gauge of choice to assess inflationary trends and might set the US Dollar’s near-term direction.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.