English
USD/JPY falls below 148.00 on BOJ minutes as investors focus on rates and the Fed's verdict
The USD/JPY accepts offers to extend yesterday's retreat from a weekly high. The BOJ Minutes maintain the strategy of cheap money despite voicing concerns about the weak yen. Yields struggle as stronger US data and hawkish Fed wagers compete with predictions for December rate hikes that are less aggressive. US data of secondary importance can amuse pair traders, but the FOMC provides the clearest direction.
Even as the Bank of Japan's (BOJ) monetary policy meeting minutes support cheap money policies on Wednesday morning, the USD/JPY remains unstable near 147.80. As traders prepare for the crucial Federal Open Market Committee (FOMC) meeting, the yen pair reaffirms its intraday low while dropping for the second consecutive day.
The most recent BOJ Minutes lauded Tokyo's economic shift while noting, "A few members stated that Japan is still a long way from achieving BOJ price objective in a stable, sustained manner." Several members stated in the Minute statement that a weak yen could harm households, small businesses, and non-manufacturers.
The USD/JPY pair fails to explain the current sluggishness of US Treasury yields as well as the BOJ's justification of cheap money policies, despite touching the intraday low. In spite of this, rates on 10-year US Treasuries remain stagnant around 4.05% following a positive start to November.
Notable is the fact that the yen pair was buoyed by the broad dollar weakness as well as rumors about Japan's market intervention the day before, which snapped a two-day rally. However, the policymakers did not provide specifics regarding the large amount spent in September to defend the yen.
In contrast, the US dollar struggled to respond positively to the stronger data due to uncertainty on how and when the US Federal Reserve (Fed) may slow its aggressive rate hike trajectory. It should be noted that the US JOLTS Job Openings rose to 10,717M in September, compared to 10.0M anticipated and upwardly revised 10.28M previous readings. In addition, the US ISM Manufacturing PMI increased to 50.2 in October, compared to 50.0 market expectations and 50.9 previously. Final readings of the US S&P Global Manufacturing PMI for October surpassed 49.9 early estimates to reach 50.4, but remained below the previous month's readings of 52.0.
As a result of these bets, S&P 500 Futures post modest gains despite Wall Street's negative close.
In conclusion, the USD/JPY struggles to reflect the market's hesitation among the cautious optimism of Japanese officials. Traders are awaiting the Fed's decision and the US ADP Employment Change for October, which is anticipated to be 193K compared to 208K previously.
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