- A combination of factors helps USD / JPY gain traction for the second day in a row.
- Risk appetite and a pessimistic BoJ weighs on the safe-haven JPY and supports the pair’s upward move.
- A modest rally in US bond yields benefits the USD and provides an additional boost to the pair.
The pair USD / JPY maintains its intraday gains at the start of the European session Tuesday, staying comfortably near the 108.30-25 region.
The pair has moved higher for the second day in a row and has reached a one-week high at 108.38 during the first half of trading action on Tuesday. The underlying bullish tone in financial markets has weighed on demand for the Japanese yen as a safe haven. The bulls have followed the signs of a modest rebound in US Treasury yields, which extended some support to the US dollar and has provided additional boost to the USD / JPY pair.
Supporting factors, to a greater extent, have been seen countered by concerns that rising COVID-19 infections in India and Japan could derail the global economic recovery. The pair has lacked strong continuation buying and witnessed a modest pullback. after the Bank of Japan (BoJ) announced its monetary policy decision. As widely expected, the BoJ has left the benchmark interest rate unchanged at -10 basis points at the end of its monetary policy review meeting on Tuesday.
Furthermore, the Japanese central bank has kept its commitment of buying J-REITS at an annual rate of up to 180,000 million yen and has clarified that the 10-year JGB yield may rise or fall 0.25% around its 0% target. The BoJ also modified the ETF purchase limits and removed the lower ceiling of 6 trillion yen ($ 55 billion) while maintaining an upper limit of 12 trillion yen.
In the quarterly economic forecasts, the BoJ has taken a more optimistic view of growth prospects and it has raised its growth forecast for the fiscal year that started this month to 4% from 3.9% previously. At the same time, the central bank has lowered its price forecast for this year to 0.1%, reaffirming that the accommodative stance of monetary policy will not change in the foreseeable future. This has been reinforced by comments from Bank of Japan Governor Haruhiko Kuroda at the press conference after the meeting.
Kuroda has said that 2% inflation target can be achieved if powerful monetary easing is continued patiently. This, in turn, has continued to weigh on the JPY and has continued to support the bullish tone around USD / JPY. With that said, the bulls could still wait for a sustained move above the 108.50 region before positioning for any further upside.
USD / JPY technical levels
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
