USD/JPY approaches 155.50 on expectations that the Fed will extend its restrictive policy

• USD/JPY extends its winning streak amid hawkish sentiment around the Fed's stance on monetary policy.
• Fed member Neel Kashkari anticipates a continuation of high rates and suggests that further rate hikes are not completely ruled out.
• The Japanese Yen depreciated despite the possible intervention of the Japanese authorities.

USD/JPY is trading around 155.30 during the early hours of the European session on Wednesday, marking a third consecutive day of gains. The US Dollar (USD) gained ground on the possibility of the Federal Reserve (Fed) prolonging high interest rates for longer. Furthermore, hawkish comments from Minneapolis Fed President Neel Kashkari strengthened the Dollar, thereby supporting the USD/JPY pair.

As Reuters reported on Tuesday, Kashkari's remarks imply an anticipation of unchanged interest rates for a considerable period. Although the probability of rate hikes is low, it is not completely ruled out.

According to Bloomberg, Richmond Federal Reserve (Fed) President Thomas Barkin said on Monday that high interest rates could slow economic growth in the United States. However, higher interest rates can help ease inflationary pressures, bringing them closer to the 2% target set by the central bank.

Last week, the Japanese Yen (JPY) appreciated amid speculation about possible intervention by the Japanese authorities. Reuters reported data from the Bank of Japan (BoJ) suggesting that Japanese authorities may have allocated approximately 6.0 trillion yen on April 29 and 3.66 trillion on May 1 to support the yen. However, these interventions could only provide temporary relief, given the significant interest rate differentials between Japan and the United States (US).

Despite continued warnings from Japanese authorities against extreme currency movements, the Japanese Yen depreciated. Finance Minister Shunich Suzuki reiterated the warning that authorities are prepared to respond to excessive currency volatility, while Bank of Japan (BoJ) Governor Kazuo Ueda stated that they will evaluate the impact of the movements. of the yen on inflation to inform political decisions.