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The USD/JPY Exchange Rate Remains Stable Near Multi-Month Highs As Traders Await The US PCE Price Index
The USD/JPY strengthens its recent surge to its greatest level since November 2022. The divergent BoJ-Fed outlook on monetary policy functions as a tailwind for the major and favours bulls. Investors are currently awaiting the US PCE Price Index for a fresh impetus in a particular direction.
During Friday's Asian session, the USD/JPY pair is trading with a slight bullish inclination near 144.80-144.85, which represents its highest level since November 2022.
Expectations that the Bank of Japan's (BoJ) negative interest-rate policy will remain in force at least until next year continue to undermine the Japanese Yen despite the recent verbal intervention by Japanese authorities. In fact, BoJ Governor Kazuo Ueda has recently ruled out any change in ultra-loose policy settings and signalled that there are no immediate intentions to alter yield curve control measures. Along with the recent appreciation of the US Dollar (USD), this comes out to be a significant factor supporting the USD/JPY pair.
The fact that core consumer prices in Japan's capital remain above the central bank's 2% target for the thirteenth consecutive month fails to impress the JPY investors. In fact, the Japan Statistics Bureau reported in June that the Tokyo Core Consumer Price Index (CPI), which excludes volatile raw food prices, increased by 3.2% year-over-year. In addition, a measure of core inflation that excludes fresh food and energy prices rose 3.8% in June and remained close to a 40-year high reached the previous month.
The USD, on the other hand, continues to be well supported by the Federal Reserve's (Fed) hawkish outlook and stands near a two-week high reached the day before. It is important to recall that the Fed signalled earlier this month that borrowing costs may still need to increase by up to 50 basis points by the end of the year. In addition, the upbeat macroeconomic data released by the United States on Thursday provides the Federal Reserve another reason to continue raising interest rates. This provides additional support for the USD/JPY pair and increases the likelihood of further gains.
However, technical indicators on the daily chart indicate overbought conditions, which may discourage traders from placing fresh bullish wagers. Market participants may also choose to remain on the sidelines until the release of the US Core PCE Price Index, the Fed's preferred inflation indicator, later in the North American session's early hours. The crucial data will influence expectations regarding the Federal Reserve's future rate hike path, which will drive USD demand and provide fresh directional impetus to the USD/JPY pair.
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