- USD/JPY has rallied almost 200 points from the daily low and is supported by a combination of factors.
- Dovish comments from Bank of Japan Governor Ueda weigh on the yen and lift the pair amid a stronger dollar.
- The stronger-than-expected US PCE price index provides an additional boost to the dollar and major currencies.
The pair USD/JPY continued its intraday recovery from 134.00 and rose during the early hours of the North American session. Momentum picks up in reaction to the stronger than expected US PCE Price Index, lifting the pair to the 136.00 zone, or the highest level since December 20.
In fact, the US Bureau of Economic Analysis reported this Friday that inflation in the US, measured by the personal consumption price index (PCE), rose 0.6% in January. Additionally, the annual rate rose to 5.4% from 5.3% previously, beating estimates for a drop to 4.9%. We also reported that the core PCE price index – the Fed’s preferred inflation gauge – rose 0.6% m/m and 4.7% in the last 12 months, again beating expectations.
These data indicate that inflation is not declining as quickly as expected and reaffirm expectations of further tightening by the Fed. In addition, recent encouraging US macroeconomic data points to an economy that continues to resist despite rising borrowing costs and should allow the Fed to maintain its hawkish stance. This, in turn, remains support for elevated US Treasury yields, keeping the dollar near a multi-week high and acting as a tailwind for USD/JPY.
The Japanese yen (JPY), on the other hand, is weighed down by dovish remarks from incoming Bank of Japan Governor Kazuo Ueda. In fact, Ueda asserted that the Bank of Japan’s current ultra-loose monetary policy is a necessary and appropriate means to reach the 2% target. This is seen as another factor driving the USD/JPY pair, although prevailing risk appetite could underpin the JPY’s safe haven and keep any further advance limited, at least for now.
Technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
