USD / JPY Seeks To Surpass 136.20 As Fed Rate Hike Concerns Return

In the Asian session, the USD / JPY pair is struggling to prolong its auction above 136.40, while the downside appears supported around 136.00. As investors anticipate more interest rates from the Federal Reserve (Fed) to bolster its defense against persistent inflation, the asset is anticipated to continue its ascent and break above the 136.40 resistance level.

After a negative session on Wednesday, S&P500 futures posted slight gains in the Asian session, indicating a modest recovery in investors' risk appetite. Nonetheless, the overall market sentiment is quite risk-averse. Following chaotic fluctuations, it is anticipated that the range of the US Dollar Index (DXY) will contract going forward.

It appears that the hawkish posture of Federal Reserve (Fed) policymakers has given US Treasury yields new life. The premium provided on 10-year US government bonds has increased to 4%.

Raphael Bostic, President of the Atlanta Fed, anticipated that the central bank would raise the terminal rate to the range of 5.00% to 5.25% in light of the persistent character of the Consumer Price Index (CPI) in the United States. In addition, the Fed policymaker anticipates that the central bank will maintain a high terminal rate beyond 2023. In addition, Fed Chairman Jerome Powell has reiterated that a premature rate reduction could have a catastrophic effect on the inflation situation.

Wednesday's publication of the US ISM Manufacturing PMI has made it obvious that the price index is anticipated to experience a future increase. The February PMI numbers failed to impress the market, but the New Orders Index and Manufacturers' Prices Paid were able to indicate that the inflation situation is becoming increasingly complex. The order book appears solid as figures increased to 47.0 from 43.7 expected and 42.5 previously released. And, the Manufacturing Price Paid rose to 51.3 versus the consensus estimate of 45.0 and the previous release of 44.5, indicating that the Producer Price Index (PPI) may deliver an unexpected increase in the near future.

On the Tokyo front, consecutive dovish comments from Bank of Japan (BoJ) policymakers are influencing the Japanese Yen. The current monetary policy has also been deemed appropriate by board member Junko Nakagawa, following dovish comments from BoJ Governor-nominee Kazuo Ueda and BoJ Deputy Governor Ryozo Himino. He stated, "An expansionary policy is absolutely necessary for sustaining the economy and boosting earnings."