- USD/JPY extends losses due to the soft risk tone in the market.
- Japanese Yen could face a struggle due to the BoJ’s dovish stance.
- BoJ Governor Ueda reiterated to maintain ultra-loose monetary policy.
- Japanese government could intervene in the FX market to curb excess volatility.
USD/JPY moves on a downward trajectory, extending losses for the second successive day. The spot price hovers around 150.30 during the European session on Friday. The pair faces challenges, primarily influenced by a soft risk tone in the market. The likelihood of no interest rate hike by the US Federal Reserve (Fed), following a series of downbeat economic data from the United States, contributes to the overall sentiment impacting the USD/JPY pair.
The downside of the USD/JPY pair finds support in the face of a more dovish stance adopted by the Bank of Japan (BoJ). BoJ Governor Kazuo Ueda reiterated on Friday that the central bank will patiently maintain its ultra-loose monetary policy stance. Ueda expressed caution, stating that it cannot be said with conviction that the 2% inflation target will be stably attained.
US labor market data reveals challenges, with Initial Jobless Claims for the week ending on November 10 rising to 231K, surpassing the expected 220K and marking the highest level in nearly three months. Continuing Jobless Claims for the week ending on November 3 also increased to the highest level since 2022, reaching 1.865 million compared to the previous reading of 1.833 million.
Japan's Deputy Finance Minister Ryosei Akazawa has reiterated the government's stance on potential intervention in the foreign exchange (FX) market. He stated that the government will intervene in the FX market to curb excess volatility but does not have a specific FX level in mind to trigger such intervention. Akazawa emphasized that any FX intervention would be aimed at addressing excess volatility and not simply in response to the Japanese Yen (JPY) weakening.
According to the latest Reuters poll on Japan inflation estimates, ahead of the Consumer Price Index (CPI) data release on November 24, the median estimate is for annual core CPI to be at 3.0% in October. This projection reflects an increase from the 2.8% reading recorded in the previous month.
Market participants are expected to pay attention to the upcoming release of US Building Permits (MoM) and Housing Starts (MoM) on Friday. The anticipated decrease in these housing indicators for October could contribute to reinforcing the belief that the Fed is unlikely to pursue an interest rate hike in the upcoming meetings. Moreover, multiple Fed policymakers will be observed, who are scheduled to give their speeches on Friday.
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