- The Japanese Yen (JPY) is rising for a second day
- BoJ kept rates unchanged but an April hike is possible
- The US Dollar (USD) is falling against major peers
- The Fed sounded less hawkish than its central bank peers
The US dollar Japanese yen (USD/JPY) exchange rate is falling sharply after gains yesterday.. The pair fell -0.41% on Monday, settling at 159.07. On Tuesday at 17:00 UTC, USD/JPY trades -0.08% at 158.94 and traded in a range of 158.72 to 159.50.
The Japanese yen is rising sharply against a weaker U.S. dollar following the Bank of Japan and Federal Reserve rate decisions.
As expected, the Bank of Japan left interest rates unchanged at 0.75% and maintained its view that the economy is recovering moderately. However, Governor Kazuo Ueda left the door open to a potential rate hike in April.
Markets interpreted these comments as hawkish, keeping the prospect of an April hike on the table as energy prices surge. Japan, which is heavily reliant on imported energy — particularly from the Middle East — could face a stagflationary impact from rising energy costs.
The U.S. dollar is falling across the board. The U.S. Dollar Index, which measures the currency against a basket of major peers, is falling -0.08% to 99.64, extending losses for a second day.
.The USD is falling despite the Federal Reserve also leaving interest rates unchanged and projecting higher inflation, steady unemployment, and slightly stronger GDP growth.
Powell noted that inflation is cooling more slowly than hoped but remained vague on how the Fed would respond to the war, saying it is too early to assess the impact.
Although the Fed’s dot plot still signals one rate cut this year, markets are no longer pricing this in as the base case.
While the Fed struck a more hawkish tone, it was still less hawkish than the Bank of Japan, Bank of England, or ECB. As a result, the U.S. dollar is weakening.
