USD/JPY: US Dollar Rebounds Against Yen as Fed Rhetoric Strengthens
The USD/JPY currency pair climbed back to 156.00 on Friday, fueled by a resurgent US Dollar. This rebound comes after the Federal Reserve (Fed) downplayed expectations of imminent rate cuts.
Key Drivers:
- Fed Rejects Rate Cut Expectations: Fed officials, including John Williams, emphasized that a single drop in US inflation data is not enough to warrant a change in monetary policy.
- Stronger US Dollar: The Fed's stance led to a broader US Dollar rebound, with the USD Index (DXY) rising to 104.70.
- US Treasury Yields Up: Anticipation of a prolonged period of higher interest rates pushed 10-year US Treasury yields to 4.39%.
Impact on Japan:
- Challenges for Bank of Japan (BoJ): Japan's weak Q1 GDP growth (contracting at 0.5%) casts doubt on the BoJ's plans to tighten monetary policy.
Outlook:
- USD/JPY Upward Trend: The recent rise in USD/JPY suggests a potential continuation of the upward trend.
- Market Uncertainty: Despite the Fed's stance, market expectations for September rate cuts remain at 68% (down from 73% after the inflation data).