The Japanese Yen drifts lower for the second straight day and is pressured by a combination of factors.
The BoJ’s cautious stance, softer domestic data and a positive risk tone undermine the safe-haven JPY.
The upbeat US NFP-inspired USD strength lifts USD/JPY back closer to the multi-decade high.
The Japanese Yen (JPY) witnessed an intraday turnaround from over a two-week high touched against its American counterpart on Friday and finally settled near the lower end of its daily trading range. The Bank of Japan's (BoJ) dovish language, signaling that the next rate hike will be some time away, along with a positive risk tone, turned out to be key factors undermining the safe-haven JPY. The selling bias remains unabated during the Asian session on Monday following the release of softer domestic data, showing that real wages in Japan fell in February for the 23rd consecutive month.
Apart from this, a generally positive tone around the equity markets dents demand for the safe-haven JPY. This, along with the emergence of some US Dollar (USD) buying, bolstered by Friday's upbeat US monthly jobs data, pushes the USD/JPY pair back closer to a multi-decade high touched last week. The blowout Nonfarm Payrolls (NFP) report suggested the Federal Reserve (Fed) may delay cutting interest rates and forced investors to scale back their expectations for three rate cuts in 2024. This remains supportive of elevated US Treasury bond yields and acts as a tailwind for the buck.
The JPY bulls, meanwhile, fail to gain any respite from the recent jawboning from Japanese authorities, showing readiness to intervene in the markets to prop up the domestic currency. This suggests that the path of least resistance for the USD/JPY pair is to the upside amid expectations that the gap between US and Japanese interest rates will stay wide. Market participants now look to the release of the latest US consumer inflation figures and the FOMC meeting minutes on Wednesday for clues about the Fed's rate-cut path. This will influence the USD and provide a fresh impetus to the currency pair.
