The Japanese Yen has witnessed a slight rebound against the US Dollar during the Asian trading session on Friday, breaking a two-day trend of decline. This reversal is primarily attributed to comments from government officials and a recent uptick in domestic inflation data, which may provide the Bank of Japan (BoJ) with some leeway regarding interest rate adjustments.
Despite this temporary strength in the Yen, market participants largely anticipate that the BoJ will refrain from any further interest rate hikes for the remainder of the year. This sentiment is fueled by uncertainty surrounding the new political leadership’s approach to monetary policy and the forthcoming general election on October 27. Additionally, a prevailing positive risk sentiment is likely to limit any significant appreciation of the Yen, particularly given the ongoing robust bullish sentiment for the US Dollar.
Recent comments from Japan’s top currency diplomat highlighted concerns over rapid fluctuations in the Yen’s value, suggesting that excessive volatility is unwelcome. Accompanying these remarks, government data indicated that the Consumer Price Index (CPI) had eased to a year-on-year rate of 2.5% in September, with core inflation also showing signs of slowing down. This suggests that the BoJ may have less room than expected for further rate increases, especially in light of opposition to such moves from key political figures.
While Japan’s economic indicators drew some attention, the market reaction was muted, overshadowed by recent positive data from the United States, which support the notion of a steady rather than aggressive approach from the Federal Reserve. The USD Index remains strong, reinforcing the expectation of upside for the USD/JPY pair.
From a technical standpoint, the USD/JPY pair has shown resilience, with recent movement above the 150.00 mark indicating potential for further gains. Any retracement is likely to be viewed as a buying opportunity, with support levels close to 149.20 and further key areas around 149.00. Conversely, breaking through the 150.30 level could open the door for continued appreciation toward levels around 152.00 in the near term.
