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USD / JPY Fluctuates Above 133.00, And a Decline Seems Probable As The Fed Continues Its Mild Rate Hikes
As investors await US CPI for fresh impetus, USD / JPY is hovering above 133.00. As a result of the SVB repercussions, the Fed may disregard a forthcoming rate increase. The publication of the BoJ minutes will reveal the likely future course of monetary policy.
In the Asian session, the USD / JPY pair is exhibiting back-and-forth movement above 133.00. The asset has shown a recovery move from 132.50 but is unable to extend gains due to the absence of strength in the US Dollar Index (DXY) following the Silicon Valley Bank (SVB) debacle. The loss of confidence of market participants in the United States banking system has drastically reduced the safe-haven appeal.
S&P500 futures have recouped a portion of Monday's losses, indicating a modest improvement in market sentiment. The USD Index is attempting to reclaim the immediate resistance level of 103.80, but the upside appears constrained due to expectations that the Federal Reserve will continue its modest rate rise cycle (Fed). The USD Index has been impacted by the reduction of 50 basis points (bps) in anticipated rate hikes by the market.
In the meantime, the demand for U.S. government bonds is decreasing once more, which may indicate a shift away from safe-haven assets. The yields on 10-year US Treasuries have risen above 3.56 percent.
Tuesday's publication of United States Consumer Price Index (CPI) data would be a significant catalyst for the foreign exchange market. Wells Fargo analysts anticipate "another monthly increase of 0.4% in the aggregate CPI in February, bringing the annual rate to 6.0%." We still expect inflation to decline, but the process is likely to be uneven and time-consuming. Despite some directional improvement over the past few quarters, prices are still rising well above the Fed's 2% target, and the constrained labor market suggests that inflationary pressures could prevent a full return to 2%.
Hirokazu Matsuno, the chief cabinet secretary of Japan, stated on Monday that they do not expect the SVB repercussions to have a significant impact on Japan's financial companies. He added, "Japan's financial institutions have sufficient liquidity and capital base overall."
The minutes of the Bank of Japan's (BoJ) most recent monetary policy meeting, led by ex-BoJ Governor Haruhiko Kuroda, will be closely scrutinized moving forward.
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