USD/JPY continues losing streak on firm bets over BoJ quitting negative rates

• USD/JPY extends losing streak on firm BoJ rate hike bets.
• The revised estimate shows that the Japanese economy accelerated meager by 0.1% in the last quarter of 2023.
• The US Dollar will dance to the tunes of the US Inflation data.

The USD/JPY extends its losing spell for the fifth trading session on Monday. The asset drops 146.70 on broader weakness in the US Dollar and rising expectations for the Bank of Japan (BoJ) exiting its expansionary interest rate stance in the March monetary policy meeting.

BoJ policymakers have indicated that a positive wage cycle will continue for a substantial period that will keep inflation sustainably above the desired target of 2%. Investors hope that the BoJ will scrap its Yield Curve Control (YCC) and will shift to policy normalization.

Meanwhile, expectations for the BoJ raising interest rates have also been prompted, as the revised estimate for Japan’s Q4 Gross Domestic Product (GDP) shows that the economy was not in a technical recession in the second half of 2023. The revised estimates show that the economy grew by 0.1% against a degrowth of 0.1% indicated by the preliminary estimates.

On the US Dollar front, the expectations for the Federal Reserve (Fed) reducing interest rates from the June policy meeting remain firm as labor market conditions have cooled down despite upbeat job growth. The United States employers recruited 275K jobs, against expectations of 200K and the prior reading of 229K, downwardly revised from 353K. The Unemployment Rate rose to 3.9% from 3.7%.

Firm expectations for the Fed unwinding its restrictive policy stance for June have built pressure on the US Dollar. The US Dollar Index (DXY), which gauges Greenabck’s value against six major currencies, drops to 102.70.

For further guidance, investors await the US Consumer Price Index (CPI) data for February, which will be published on Tuesday. Investors should note that the soft Average Hourly Earnings data for February, released on Friday, indicates cooling inflation expectations.