Will the Japanese yen recover
2022.12.29 06:46
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This week’s dollar rally of over 1% was slowed by gains in the Japanese yen on Thursday. It is trading at 133.64 in the European session, down 0.60 percent.
Low liquidity this week resulted in many traders either closing their books or taking a break at the end of the year. Japanese business sectors have been open the entire week, and USD/JPY has shown more development than different majors.
In a week when there haven’t been many economic releases, the Bank of Japan has given the markets a lot of information. The BoJ shocked the markets last week by increasing the bond yield curve band from 0.25 percent to 0.50%.
The yen sharply rose as a result of the move, which had the same effect as raising rates. Governor Kuroda stated after the change that the modification aimed to make the yield curve more sustainable rather than to eliminate it. There has been speculation among investors that the BoJ may either remove its control over the yield curve or raise the cap to 0.75 percent.
More Pound falls despite weak dollar
The Bank of Japan has attempted to dispel rumors that the yield curve will undergo additional adjustments. On Wednesday and again today, the Bank announced unlimited bond purchases in an effort to maintain its 10-year bond yield curve target of around 0%.
This target, which the BoJ has insisted will remain unchanged, did not change as a result of the tweak to the yield curve band. The BoJ and investors are continuing their cat-and-mouse game, with each side testing the other’s resolve. In October, the yen fell near 152 preceding the Service of Money mediated in the cash showcases and set up the yen.
Is increasing in Japan, reaching a 40-year high of 3.7%. However, the BoJ is still not convinced that inflation can be sustained without stronger wage growth. In the event that work arrangements in mid 2023 outcome in higher wages, the BoJ could raise its yield bend control target, which would be a monstrous change in strategy.
USD/JPY Technical
- USD/JPY tested support at 133.62 earlier. The next support level is 132.62
- There is resistance at 134.86 and 135.98
