The USD/JPY pair is displaying back-and-forth moves in a narrow range of 142.27-142.58 in the Tokyo session. The asset displayed a pullback move after hitting a low below 141.00. The major is expected to re-test the cushion of 141.00 as the Bank of Japan (BOJ) could intervene further in the currency markets to support yen.
BOJ’s decision for an intervention in the currency markets for the first time after 1998 dragged the USD/JPY pair dramatically below 141.00. Being the world’s second-largest FX reserve, the BOJ holds sufficient ammunition to continue supporting yen. The central bank decided to intervene to halt the continual depreciation of the Japanese yen as it believes that the current price doesn’t justify the fundamentals.
The intervention move in the currency market by the BOJ came after the announcement of the monetary policy. BOJ Governor Haruhiko Kuroda continued its dovish stance on interest rates and cited that the hawkish Federal Reserve (Fed) policy won’t have any impact on Japan’s economic situation. He also cited that further policy easing is crucial for the Japanese economy as it is still recovering from the impact of the Covid-19 pandemic.
While the US dollar index (DXY) has continued to remain sideways around 111.30 as investors are awaiting for volatility cool-off post the extreme hawkish Fed policy to make an informed decision. Selling interest shown by the DXY on Thursday after hitting a fresh two-decade high of 111.81 has demolished the overall bullish structure.
Going forward, the S&P Global PMI data will be of utmost importance. The Manufacturing PMI is seen lower at 51.1 vs. the prior release of 51.5. While the Services PMI will improve to 45.0 against the prior print of 43.7.
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