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The Japanese Yen weakens against the US Dollar on Monday amid still–elevated US interest-rate projections.  The Fed’s reluctance to entertain interest-rate cuts until more data assures them inflation is coming down, is a factor.  The BoJ’s expected bond-taper supports JPY but weak wage data and imported inflation weigh.  The Japanese Yen (JPY) trades lower by about a third of a percent against the US Dollar (USD), in the 157.80s on Monday, as the outlook for interest rates in the US remains elevated despite lower inflation and economic sentiment readings. The expectation of higher interest rates supports the USD by attracting greater inflows of foreign capital.  The Japanese Yen, meanwhile, weakens as despite moderate gains to inflation, Japanese real wages – which are adjusted for inflation – continue to fall, registering the 25th consecutive month of declines in April, data from the Ministry of Health, Labor and Welfare shows. The data suggests much of Japan’s inflation is imported because of a historically weak Yen rather than due to increased consumer spending.  The Yen does however receive a modicum of support from Friday’s Bank of Japan (BoJ) meeting. Although the BoJ did not raise interest rates which languish in a range between 0.0% – 0.1% – the lowest of any developed central bank – it did say it was planning to reduce quantitative easing (QE). Officials announced that at the next meeting in July they would be revealing plans on tapering Japanese Government Bond (JGB) purchases. A reduction in QE is positive for the Japanese Yen as it helps raise interest rates.   USD/JPY remains supported by comments from the Chairman of the Federal Reserve (Fed), Jerome Powell. At the Fed’s June policy meeting Powell said he needed more assurances that inflation was coming down in a sustainable fashion before cutting interest rates. …

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Filed under: News - @ June 17, 2024 7:22 pm