Category: Forex News

USD/JPY Forecast: BoJ’s Tamura Naoki, the Zero Rate Path, and Interventions

A different outlook on the interest rate path would move the dial. Tamura Naoki will speak at a tumultuous time for the Japanese Yen. The Japanese government has jawboned the Yen for several sessions to prevent further weakening. Suggestions of tightening monetary policy further in H1 2024 could ease selling pressure on the Yen.

Investors should consider comments about interest rate hikes and the possible effects on consumer price inflation. A stronger Yen could counter the influence of rising demand on prices stemming from wage hikes. The net outcome could be a zero-rate path for the Bank of Japan.

However, interest rate differentials remain another consideration. Interest rate differentials favor carry trades to the US dollar, which could continue supporting the USD/JPY at current levels.

In carry trades, investors borrow from the lower interest rate currency, in this case, the Yen. With leverage, traders can significantly enhance earnings by purchasing a currency with a higher interest rate, in this case, the US dollar. While traders enhance earnings, the Yen weakens on selling pressure.

US Economic Calendar: Fed Speakers Pre-Inflation Numbers

On Wednesday, investors must consider Fed commentary ahead of the heavily anticipated inflation numbers.

Recent Fed speeches created uncertainty regarding the timing of a Fed interest rate cut. Deviation from the median FOMC Economic Projections for the Fed Funds Rate forced investors to recalibrate bets on an H1 2024 Fed rate cut.

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