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USD / JPY Rises To 137.40 On Hawkish Fed Powell Comments, BoJ Policy, And US Employment Data
As the Fed confirmed additional rates to contain inflation, USD / JPY reached a high of 137.40. The theme of risk aversion has driven 10-year US Treasury yields above 3.98 percent. The final BoJ Kuroda policy is expected to maintain an ultra-lax monetary policy.
After an unusual upward move prompted by hawkish remarks from Federal Reserve (Fed) chair Jerome Powell in his congressional testimony, the USD / JPY pair has climbed to near 137.40 in the early Asian session. Powell, the president of the Fed, has advocated for an increase in interest rates, citing inflation as being extremely persistent in light of the economic data coming out of the United States.
After an intense sell-off on Tuesday, S&P500 futures recorded nominal gains, which may represent minor short coverings amid a bearish market sentiment. The US Dollar Index (DXY) closed Tuesday's session at a three-month high above 105.60 as the likelihood of a U.S. economic recession increased. The theme of risk aversion has driven 10-year US Treasury yields above 3.98 percent.
In his testimony before Congress, Fed Chairman Powell revealed a new plan for reducing inflation. As the current monetary policy is not restrictive enough to attain price stability, more interest rates are forthcoming. According to Fed Chairman Powell's testimony, investors should anticipate more rate increases than previously anticipated because economic indicators indicate that inflationary pressures are intense.
Investors should be aware that this was Powell's first comment on interest rates after observing resiliency in consumer spending and an optimistic labor market in January's economic data.
The publication of the US Automatic Data Processing (ADP) Employment Change (Feb) data will be of the uttermost importance in the future. The economic data is anticipated to be 200K higher than the previous release of 106K.
On the Tokyo front, investors eagerly await Bank of Japan (BoJ) Governor Haruhiko Kuroda's final monetary policy statement, scheduled for Friday. As the economy focuses on increasing the labor cost index, it is highly probable that the monetary policy will remain extremely lax. When yields on Japanese Government Bonds are adjusted, the market has varied reactions (JGBs).
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