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The USD/JPY pair has broken to the higher after oscillating around 133.50 during the Asian session. Expectations that the Bank of Japan (BOJ) will maintain its ultra-lax monetary policy have prompted volatility in the Japanese Yen.

Despite volatility in risk-sensitive assets, the USD Index has maintained a range-bound performance around 103.80. Tuesday's selling pressure on the S&P 500 was driven by weakness in technology firms. In addition, a fall in economic activity, as reported by the United States Census Bureau's Trade Balance statistics, brought uncertainty to US stocks.

In November, the US international rate deficit decreased by $15.5 billion to $83.3 billion, from $98.8 billion in October. The fall in the trade deficit is not due to a corresponding increase in exports, but rather to a decline in economic activity as a whole. The US economy has begun to feel the effects of the Federal Reserve's (Fed) decision to raise interest rates to manage inflation.

In the meantime, the decrease in US Durable Goods Orders and household consumption expenditure has begun to raise red signals about the Fed's hawkish monetary policy. ING economists believe that the recession will accelerate inflation's decline, allowing the Fed to decrease interest rates before the end of CY2023.

On the Japan front, Reuters disseminated the Bank of Japan (BOJ) Summary of Opinions for the most recent monetary policy meeting, which emphasized that the central bank must maintain its easy monetary policy because Japan is in a crucial phase for achieving its price target. In addition, the economy is exhibiting symptoms of wage increases, which is a positive economic cycle, but it is reasonable to keep an easy monetary policy for the time being.

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