- Japanese Yen (JPY) rises after losses yesterday
- Hawkish BoJ expectations boost the yen
- US Dollar (USD) falls versus its major peers
- Fed cut rates by 50 basis points
The US Dollar Japanese Yen (USD/JPY) exchange rate is falling after gains yesterday The pair rose 1.3% in the previous session, settling on Tuesday at 142.40. At 20:00 UTC, USD/JPY trades -0.08% at 142.29 and is in a range of 140.45 to 142.72.
The Japanese yen is benefiting from the weaker U.S. dollar and the diverging monetary policy outlook of the Federal Reserve and the Bank of Japan.
While the Fed is cutting rates and kicking off a rate-cutting cycle, the Bank of Japan hiked rates last month and is set to adopt a more hawkish stance, with another possible hike later in the year.
The economic calendar has been relatively quiet for the yen this week, but all eyes are on the Bank of Japan’s interest rate decision on Friday.
The US Dollar is falling against the yen but is flat against its major peers. The US Dollar Index, which measures the greenback against a basket of major currencies, trades at 100.94 at the time of writing, up 0.02%, marking a second day of gains.
The U.S. dollar is falling lower across the board after the Federal Reserve cut interest rates by 50 basis points, taking the rate to 4.75%—5%.
Heading into the meeting, the market was undecided about whether the Fed would opt for a 25-basis-point or an outsized 50-basis-point reduction to mark the first rate reduction in four years and kick off an easing cycle.
Fed chair Powell said that the US economy was in a good place and the decision to cut by 50 basis points was designed to keep it there.
The dot plot, which lays out policymakers’ expectations for the path of interest rates, pointed to the Federal Reserve cutting rates by 50 basis points further before the end of the year.
The right decision comes as US inflation cools towards the central bank’s 2% target and as other macroeconomic data sends mixed signals. The Fed said it was prepared to act if the labor market weakened.