The USD/JPY pair continues its decline, reaching a nearly two-month low below 138.00. The USD remains weak as expectations of the Fed's rate-hiking cycle coming to an end persist.
The Japanese Yen (JPY) is experiencing a boost due to the potential adjustment of the Bank of Japan's (BoJ) Yield Curve Control (YCC) policy. The speculation surrounding changes in the BoJ's policy stems from Japan's robust economic indicators and increasing inflation, which are exerting pressure on the central bank to modify its extremely accommodative monetary stance.
Market sentiment suggests that the Federal Reserve (Fed) is approaching the end of its rate-hiking cycle. Recent reports of moderating consumer prices and subdued producer prices in the US support the belief that the Fed may adopt a more dovish stance.
The declining US Treasury bond yields lead to a narrower US-Japan rate differential, strengthening the JPY. Additionally, a modest pullback in US equity futures increases demand for the safe-haven JPY, suggesting a downward trajectory for the USD/JPY pair.
The USD/JPY pair is on track to record its most significant weekly drop in several months. The overall market sentiment and fundamental backdrop favor bearish traders, as the USD weakens against the JPY. Traders await the release of the Preliminary Michigan US Consumer Sentiment Index for potential market-moving insights.
The news surrounding the USD/JPY pair highlights the continued weakness of the US Dollar in the Forex market. Traders are closely monitoring the developments related to the Bank of Japan's potential adjustments to its Yield Curve Control policy and the Federal Reserve's rate-hiking cycle. The growing speculations about the BoJ's YCC policy and expectations of the Fed's dovish stance have contributed to the depreciation of the USD against the JPY. The narrowing US-Japan rate differential and declining US Treasury bond yields further reinforce the downside pressure on the USD/JPY pair. However, oversold market conditions may temper the bearish sentiment in the short term. Traders are advised to monitor upcoming economic data, such as the Preliminary Michigan US Consumer Sentiment Index, for potential market-moving events that could further impact the USD/JPY pair.