By Camilo Botia
The Japanese yen weakened against the dollar for a second consecutive day on Monday as doubts emerged regarding the Bank of Japan’s (BOJ) plan to phase out its negative interest rate policy. This comes despite a brief surge in the yen last week following new BOJ Governor Kazuo Ueda’s comments suggesting a potential policy shift.
Ueda’s statement on Thursday, which came after he met with Prime Minister Fumio Kishida, sparked hopes of a less dovish approach by the BOJ. He mentioned that the central bank possessed “several options” for targeting interest rates once it exits the negative rate territory.
However, a Bloomberg report on Monday threw cold water on these expectations. According to the report, BOJ officials need evidence that wage growth justifies ending the ultra-loose monetary policy this December. Analysts believe this cautious stance is the primary reason behind the yen’s recent decline. Ueda’s comments last week were not a concrete statement that they would end the negative interest rate.
The USDJPY has climbed to $146.11, erasing almost all the yen’s gains from Thursday when it touched $141.50. The 200-day moving average coincided last Thursday with an oversold market, signalled by the RSI indicator, pushing the pair to trade above $144.63, now its closest support. Market attention now shifts to critical economic data releases and central bank meetings. Investors are keenly awaiting U.S. consumer price inflation data, which will influence the Federal Reserve’s future policy decisions. The next two resistances for the USDJPY are $148.74, significant monthly support, and $151.56, around the highest price for the USDJPY in 2023.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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