USD/JPY seeks to approach 148.50 following the Bank of Japan’s decision to keep interest rates unchanged

• USD/JPY recovers recent losses due to the BoJ’s decision not to change interest rates.
• The BoJ could consider adjusting its ultra-loose monetary policy when the 2% inflation target is within reach.
• Investors are awaiting US data for valuable information on the country’s economic conditions.

USD/JPY recovers losses recorded on Thursday following the Bank of Japan (BoJ) interest rate decision. As expected, the BoJ kept its current interest rates at -0.1%. The pair trades higher around 148.30 during the European session on Friday.

BoJ Governor Kazuo Ueda held a press conference following the September monetary policy meeting on Friday. The BoJ governor has mentioned that the central bank could consider ending yield curve control and adjusting its negative interest rate policy when they believe reaching 2% inflation is within reach.

The head of monetary policy has stressed that “there is no change in the shape of the political decision-making process”, indicating that the BoJ continues to carefully analyze new data at each monetary policy meeting.

Ueda further stated that they have not yet seen inflation reach a stable level of 2%. He also mentioned that the next monetary policy decision in October will be conditional on data, including the government’s expansion of gasoline aid.

The BoJ is prepared to implement further easing measures if it deems necessary. Ueda acknowledged that there is a high degree of uncertainty regarding economic conditions, price trends and financial and currency markets.

Japan’s national Consumer Price Index (CPI) report for August showed a reading of 3.2%, down from the previous rate of 3.3%. For its part, the national CPI excluding fresh foods remained at 3.1%, compared to the 3.0% expected.

The US Dollar Index DXY is trading higher around 105.40, and these gains can be partly attributed to the positive performance of US Treasury yields. The US 10-year bond yield has improved to 4.49% at the time of writing, the highest level since 2007.

Market participants are awaiting the release of economic data, including preliminary US S&P Global PMIs for September. These figures can provide valuable information about economic conditions in the United States (US) and can help traders identify potential opportunities with the US Dollar (USD).

The latest US economic data, released on Thursday, presented a mixed picture. Initially, it strengthened the dollar, signaling a resilient labor market. However, it later experienced a correction.

Initial jobless claims in the United States for the week ending September 15 reported a figure of 201,000, representing a decrease from the previous reading of 221,000 and reaching the lowest level since January. This figure exceeded expectations, since a higher figure, 225,000, was expected.

The Philadelphia Fed’s manufacturing survey fell to 13.5 points in September, below expectations. Analysts had expected a decline of just 0.7 from the previous positive reading of 12.

Regarding existing home sales (month-on-month), August saw a decline to 4.04 million from the previous figure of 4.07 million. An increase to 4.10 million was expected.

As widely expected in the market, the Federal Reserve (Fed) chose to keep interest rates within the 5.25-5.50% range during its meeting on Wednesday. Fed Chairman Jerome Powell, during a subsequent press conference, reiterated the Fed’s commitment to achieving a 2% inflation target. Powell also mentioned that the Fed is prepared to raise rates if it deems necessary.