The Japanese Yen (JPY) is still trading around a three-week low against the USD on December 17, as the market awaits important decisions from the Bank of Japan (BoJ) and the US Federal Reserve (Fed). Expectations that the BoJ will keep short-term interest rates unchanged, combined with risk-on market sentiment, have reduced the appeal of the JPY - considered a safe haven asset.
In addition, high US government bond yields due to expectations that the Fed will ease its dovish policy also put pressure on the Yen - which has a much lower interest rate than the USD.
However, investors are not rushing to sell heavily, instead staying on the sidelines to wait for important information. Specifically, the Fed will announce its policy on Wednesday and the BoJ will make its decision on Thursday. During this time, the strong USD remains a supporting factor for the USD/JPY pair.
Expectations that the BoJ will continue to keep interest rates unchanged pushed the USD/JPY pair to a three-week high. Japanese Economy Minister Ryosei Akazawa also stressed that the BoJ will coordinate with the government to ensure appropriate monetary policy.
The yield on the 10-year US government bond rose to its highest level since November, after economic data showed the US services sector grew at its fastest pace in more than three years.
The US services PMI rose to 58.5 in December, its highest level in 38 months, while the composite PMI rose to 56.6, its highest level in nearly three years. Although the manufacturing PMI fell slightly, the figures reinforced expectations that the Fed will continue to gradually slow the pace of monetary policy easing.
The market is now all but certain that the Fed will cut interest rates by another 0.25% on Wednesday. However, all eyes will be on the decisions from the Fed and the BoJ, as this will be the key factor in determining the new direction of the yen.
In the short term, traders are also awaiting US retail sales data, which will impact 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.
