USD/JPY drops to 146.00 amid sluggish DXY, BOJ policy grabs attention

• USD/JPY has slipped to near 146.00 amid a vulnerable performance by the DXY.
• Rising demand for US bonds due to an upbeat market mood has resulted in a vertical drop in yields.
• Key triggers will be US GDP and Durable goods Orders for the DXY.
• The BOJ may continue its dovish stance due to external demand shocks.

The USD/JPY pair has dropped sharply to 146.00 in the Asian session, following the bearish cues from the US dollar index (DXY). The asset has continued its two-day losing streak after surrendering Wednesday’s low at 146.22. The major is declining towards the low of knee-jerk reaction recorded on Monday to near 145.77.

The greenback bulls are facing an intense sell-off led by an upbeat market mood. The strengthening of a risk appetite theme has underpinned the risk-sensitive currencies. Meanwhile, the US dollar index (DXY) has refreshed its monthly low at 109.56 and is likely to remain on the tenterhooks ahead of the crucial US economic data.

Rising demand for US government bonds led by sheer optimism in global markets has resulted in a vertical drop in yields. The 10-year US Treasury yields have dropped to 4%.

On the economic data front, the US GDP has witnessed a growth rate of 2.4% in the third quarter, as per the estimates. Expectations are pointing at a growth rate despite the Federal Reserve (Fed)’s ultra-hawkish monetary policy against the de-growth of 0.6% reported earlier.

Also, the US Durable Goods Orders data will remain in the spotlight. The economic data is seen higher at 0.6% against a drop of 0.2%. It is worth noting that core inflation that excludes oil and food prices is on an escalation spree. In spite of this fact, the anticipation of an increment in demand for durable goods indicates robust demand from US households.

On the Tokyo front, investors are focusing on the interest rate decision by the Bank of Japan (BOJ), which is due on Friday. Considering the external demand shocks, BOJ Governor Haruhiko Kuroda would continue with an ultra-loose monetary policy to spurt the growth prospects. Also, Japanese officials are worried that the inflation rate could return below 2% again, therefore, keeping policy extremely loose is an optimal option.