According to FXStreet, on December 17, the Japanese Yen (JPY) is still trading around a three-week low against the USD, as the market awaits important decisions from the Bank of Japan (BoJ) and the US Federal Reserve (Fed). Expectations of the BoJ keeping short-term interest rates unchanged, combined with a risk-off market sentiment, have reduced the appeal of the JPY - which is considered a safe-haven asset.
In addition, US government bond yields are at a high level thanks to expectations that the Fed will ease the dovish policy, also putting pressure on the Yen - which has a much lower interest rate than the USD.
However, investors are not rushing to sell big, instead standing outside the market waiting for important information. Specifically, the Fed will announce its policy on Wednesday and the BoJ will make a decision on Thursday. During this time, the strong USD is still a supporting factor for the USD/JPY pair.
Expectations that the BoJ will continue to keep interest rates unchanged have pushed the USD/JPY pair to a three-week high. Japanese Economy Minister Ryosei Akazawa also emphasized that the BoJ will coordinate with the government to ensure appropriate monetary policy.
The yield on the 10-year US government bond has risen to its highest level since November, after economic data showed the US service sector is growing at the fastest pace in more than three years.
The US services PMI rose to 58.5 in December, a 38-month high, while the composite PMI also rose to 56.6, its highest in nearly three years. Although the manufacturing PMI has eased slightly, the figures have reinforced expectations that the Fed will continue to gradually reduce the pace of monetary policy easing.
The market is now almost certain that the Fed will cut interest rates by another 0.25% on Wednesday. However, all attention will be on the decisions from the Fed and the BoJ, as this will be a key factor in determining the new direction of the Yen.
In the short term, traders are also waiting for US retail sales data, which will affect the demand for the USD and create opportunities for the USD/JPY pair to fluctuate.
According to Lao Dong, updated at 2:00 p.m. on December 17, the USD/JPY exchange rate is currently fluctuating around 153.960 USD/JPY, meaning 1 USD can be exchanged for about 154 JPY.
Update the latest Yen exchange rate HERE.
