- The Japanese Yen (JPY) rises for a second straight day
- BoJ minutes are released at 00:30 GMT
- The US Dollar (USD) falls versus its major peers
- USD falls after Powell’s speech
The US dollar Japanese yen (USD/JPY) exchange rate is falling for a second straight session. The pair fell 0.26% in the previous session, settling on Monday at 147.73. On Tuesday at 18:30 UTC, USD/JPY trades -0.014% at 147.52 and traded in a range of 147.46 to 147.93.
The Japanese yen is edging higher ahead of the eagerly awaited minutes from last week’s meeting. The Bank of Japan left interest rates unchanged at its September meeting, and the market remains unclear about the timing of the Bank of Japan’s next monetary policy move. Traders will be scrutinising the minutes for clear signals in central banks’ intentions as the prospect of the October rate hike rises.
There is divergence within the board, which is fuelling expectations that the BoJ could be at a turning point from its ultra-accommodative policy stance. This comes as inflation in Japan remains above 3% and core CPI is at 2.7% YoY in August.
The US dollar is falling across the board. The US dollar index, which measures the USD against a basket of peers, is falling 0.11% on Tuesday at 97.23, marking the second day of losses.
The US dollar is falling as investors weigh up comments by Federal Reserve chair Jerome Powell regarding the outlook for the US economy and interest rates. Powell said the central bank is in a difficult position amid risks of stickier-than-expected inflation and weaker job growth, which have raised concerns over the health of the US jobs market.
The challenge for the Fed is that each of these problems requires a different policy approach. Attention will turn to Friday’s core PCE data, the Federal Reserve’s preferred gauge for inflation.
Following Powell’s comments, the market is still pricing in a 90% probability of a 25-basis-point rate cut in October and sees another 25-basis-point rate cut in December.
