USD/JPY corrects to near 150.00 as USD Index drops in a US holiday-shortened week

• USD/JPY falls to near 150.00 as USD Index remains under pressure.
• Traders pare Fed rate cut bets for May amid stubborn inflation data.
• The BoJ may postpone plans for exiting its dovish policy stance amid dismal economic growth.

The USD/JPY drops to near the psychological support of 150.00 in Monday’s European session. The asset has faced selling pressure due to further decline in the US Dollar Index (DXY). The USD Index, which tracks six major currencies to gauge Greenback’s value, has dropped to near 104.20.

S&P500 futures remain subdued in the London session amid an extended weekend due to the holiday in US markets because of Presidents’ Day. Meanwhile, 10-year US Treasury yields have rebounded to 4.31%, prompted by the hotter-than-expected Producer Price Index (PPI) and the consumer price inflation data for January.

While market participants have pared bets in favor of rate cuts in the May monetary policy meeting by the Federal Reserve (Fed), policymakers consider the surprisingly higher data as a one-time blip whose consideration could be a tremendous mistake. The broader inflation trend is declining, which should be mainly in focus.

Going forward, market participants will focus on the Federal Reserve (Fed) Open Market Committee (FOMC) minutes for the January policy meeting, which will be released on Wednesday. The FOMC minutes will provide the detailed reasoning behind maintaining the status-quo and a fresh outlook on interest rates.

Meanwhile, the Japanese Yen has been underpinned against the US Dollar, although investors have dialed back expectations for the unwinding of the expansionary monetary policy stance by the Bank of Japan (BoJ). The Japanese economy has entered a technical recession, which would force BoJ policymakers to continue with plans of expanding stimulus to support economic growth.

On the economic data front, investors await the preliminary Jibun Bank Manufacturing and Services PMI for February, which will be published on Tuesday.