USD/JPY Rises Above 148.40 Amidst Fears Of Intervention And Anticipation Of a BoJ Rate Decision

The USD/JPY pair advances above 148.00 after rebounding from the 147.47 low during Thursday's early Asian trading hours. Following Wednesday's policy meeting, the Federal Reserve (Fed) took a hawkish position, which boosted the value of the US Dollar (USD). The pair is currently trading at 148.41, up 0.05% on the day. However, traders remain cautious following a Wednesday morning verbal intervention by Japanese authorities.

The Federal Reserve (Fed) left interest rates unchanged at 5.25-5.50% at its September meeting. Officials are gaining confidence in their ability to reduce inflation without impairing the economy or causing significant job losses. According to the Fed's most recent quarterly forecasts, the benchmark overnight interest rate may be raised one more time this year to a maximum range of 5.50% to 5.75%, and rates may be substantially tighter through 2024 than previously anticipated.

In addition, the Federal Reserve revised its Summary of Projections (SEP), indicating that Fed officials now expect the interest rate to reach 5.1% by the end of 2024 (up from 4.6% previously). In spite of this, the higher for longer rate narrative has bolstered the US Dollar versus its competitors.

In contrast, the Bank of Japan (BoJ) interest rate decision will be Friday's highlight. It is widely anticipated that the Bank of Japan will maintain its short-term interest rate objective of -0.1% and 10-year bond yield target of around 0%. The Japanese central bank has previously declared that monetary policy shifts would not be considered until local wage and inflation data satisfy its projections.

Aside from this, traders become wary due to the dread of verbal intervention. Takehiko Nakao, a former senior currency diplomat, told Reuters on Wednesday that the Japanese government could intervene again to support the yen if it continues to decline. Earlier, Japan's chief currency diplomat, Masato Kanda, stated that the Japanese government treats foreign exchange fluctuations with a sense of urgency. This exerts some selling pressure on the Japanese Yen (JPY) and provides support for USD/JPY.

Thursday will see the release of US weekly Jobless Claims, the Philadelphia Fed, and Existing Home Sales. The focus will transfer to the Bank of Japan (BoJ) meeting decision on Friday. Traders will take cues from these events to identify USD/JPY trading opportunities.