English
Following the Fed's Decision, USD/JPY Falls as US Dollar and US Yields Plummet
As a result of the Federal Reserve adopting a more dovish posture, USD/JPY plummets. Amid the Goldilocks scenario, US economic data, such as robust retail sales and a stringent Initial Jobless Claims report, assumed a secondary position. A focus will be on the December Flash PMIs for Japan, which will precede the Bank of Japan's (BoJ) monetary policy meeting the following week.
As a result of the Federal Reserve's (Fed) decision on Wednesday, which sent US Treasury yields plummeting alongside the Greenback, the USD/JPY edged lower. Due to the Federal Reserve's adoption of a dovish posture, the pair has lost approximately 0.68% and is currently trading at 141.89.
Traders continued to process the Federal Reserve's pivot after the institution reaffirmed its stance that interest rates would remain "higher for longer." Despite a significant deceleration, inflation continues to persist at elevated levels, as reaffirmed by the monetary policy statement of the United States central bank. However, the decision by officials to reduce the fed funds rates (FFR) for 2023 to 5.4%, in addition to predicting three rate cuts in 2024, gave risk-seeking investors favorable conditions.
Notwithstanding this, they maintained a cautious stance in anticipation of Powell's remarks; however, their inability to resist 100 basis points of rate reductions sealed the doom of a robust US dollar. At 101.94, the US Dollar Index (DXY), which measures the performance of the US Dollar relative to six currencies, has declined by nearly 1.80%.
The USD/JPY pair is also being affected by the decline in the 10-year benchmark note rate, which is highly correlated with the major. The yield on 10-year US Treasury notes has decreased by 26 basis points to 3.924%.
Meanwhile, despite robust US retail sales, economic data from the United States took a back position. The Goldilocks scenario was reaffirmed by this and a narrow Initial Jobless Claims report for the week ending December 9.
The Japanese economic agenda will include Flash PMIs for December later in the year, which may not significantly impact the Japanese Yen (JPY). Traders are focusing on the monetary policy meeting of the Bank of Japan (BoJ) next week. Despite the fact that market participants do not anticipate negative interest rates to end, the BoJ may prepare the groundwork prior to implementing them.
Flash PMIs, Industrial Production, and the start of the publication of Manufacturing Indices by Fed's Regional Banks are anticipated on the US front.
Bonus rebate to help investors grow in the trading world!
