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USD/JPY falls to 146.00 amidst a weakening DXY and rising interest in BOJ policy
Due to a weak performance by the DXY, USD/JPY has declined to about 146.00. Yields have plummeted as a result of a surge in demand for U.S. bonds brought on by an optimistic market climate. The US GDP and Durable Goods Orders will be key drivers for the DXY. As a result of external demand shocks, the Bank of Japan may maintain its dovish posture.
Following the adverse signs from the US dollar index, the USD/JPY pair plummeted dramatically to 146.00 during the Asian session (DXY). The asset's two-day losing trend has extended after conceding Wednesday's low of 146.22. The major index is falling approaching the trough of Monday's knee-jerk reaction near 145.77.
The dollar bulls are facing an extreme sell-off prompted by an optimistic market sentiment. The risk-sensitive currencies have been supported by a strengthening of risk appetite. In the meantime, the US dollar index (DXY) has reached a new monthly low of 109.56 and is likely to remain on edge until the release of vital US economic data.
The yields on U.S. government bonds have plummeted because to the sheer confidence on global markets, which has caused a surge in demand. The yield on the 10-year US Treasury note has fallen to 4%.
In terms of economic data, the US Gross Domestic Product grew by 2.4% in the third quarter, according to estimates. Despite the Federal Reserve's (Fed) ultra-hawkish monetary policies and the previously announced 0.6% decline in growth, expectations point to a positive growth rate.
Additionally, the US Durable Goods Orders data will remain a focal point. The economic data is anticipated to increase by 0.6% vs a decrease of 0.2%. It is noteworthy that core inflation, which includes oil and food costs, is on the rise. Despite this, the anticipated increase in demand for durable goods reflects solid household demand in the United States.
Friday's anticipated interest rate announcement by the Bank of Japan (BOJ) is the focus of investors in Tokyo. In light of the shocks to foreign demand, BOJ Governor Haruhiko Kuroda would maintain an ultra-loose monetary policy to stimulate the growth outlook. In addition, Japanese officials are concerned that the inflation rate could fall back below 2%; hence, a policy that is exceedingly lax is the best option.
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