The USD/JPY pair traded within a narrow range during the Asian session on Wednesday, hovering just below the key 158.00 level. Despite the release of the Bank of Japan‘s (BoJ) April meeting minutes, spot prices showed minimal movement and remained close to their recent highs from late April.
According to the meeting minutes, BoJ board members discussed the risks associated with a weak Japanese Yen (JPY) on underlying inflation trends. They also indicated the possibility of raising interest rates sooner than anticipated if inflation surpasses expectations. However, these insights failed to stimulate bullish sentiment for the JPY or provide significant momentum for the USD/JPY pair. The subdued performance of the US Dollar (USD) further acted as a limiting factor for spot prices.
The US Dollar Index (DXY), which measures the Greenback against a basket of major currencies, lingered near its weekly low following weaker-than-expected US Retail Sales data released on Tuesday. This data suggested a slowdown in consumer spending, heightening speculation about a potential interest rate cut by the Federal Reserve later this year. Consequently, US Treasury bond yields declined overnight, keeping USD strength restrained.
On the other hand, recent hawkish remarks by Bank of Japan Governor Kazuo Ueda on Tuesday hinted at the possibility of rate hikes as soon as July, depending on economic indicators. This stance supported the Japanese Yen and contributed to market speculation about potential intervention by Japanese authorities to bolster the domestic currency. As a result, any upward movement in the USD/JPY pair is likely to encounter selling interest and could be limited in scope.
Overall, market participants are closely monitoring economic data and central bank rhetoric for further direction on the USD/JPY pair, amid a backdrop of mixed signals from global markets and ongoing currency dynamics.
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