- The Japanese Yen struggles to capitalize on the overnight modest uptick against the USD.
- The BoJ’s dovish stance undermines the JPY, though intervention fears limit the downside.
- Reduced bets for a June Fed rate cut should lend support to the Greenback and USD/JPY.
The Japanese Yen (JPY) edges higher against its American counterpart during the Asian session on Wednesday, albeit it lacks follow-through and remains confined in a familiar range held over the past two weeks or so. Investors remain on alert amid the possibility of intervention by Japanese authorities to prevent a destabilising fall in the domestic currency. This, along with a generally weaker sentiment around the equity markets, turns out to be a key factor lending some support to the safe-haven JPY.
The US Dollar (USD), on the other hand, is seen consolidating the previous day's retracement slide from a five-month top and contributes to the mildly offered tone surrounding the USD/JPY pair. Any meaningful appreciating move for the JPY, however, seems elusive in the wake of the Bank of Japan's (BoJ) dovish language, signalling that the next rate hike will be some time away. In contrast, the markets continue trimming their bets that the Federal Reserve (Fed) will cut interest rates in June.
Expectations that the gap between US and Japanese interest rates will stay wide might further hold back the JPY bulls from placing aggressive bets, which, in turn, should help limit the downside for the USD/JPY pair. Investors now look to the US economic docket – featuring the release of the ADP report on private-sector employment and ISM Services PMI. This, along with speeches by influential FOMC members, including the Fed Chair Jerome Powell, should provide a fresh impetus later today.
