Investors cautious about the Japanese Yen before the decisions of FOMC and BoJ
The Japanese Yen (JPY) recovered slightly after falling in the Asian session, but the possibility of a strong increase is still unlikely. The reason is that the market expects the Bank of Japan (BoJ) to keep interest rates unchanged this week.
US bond yields have also increased recently thanks to the expectation that the US Federal Reserve (Fed) will temporarily stop cutting interest rates, reducing the attraction of the low-yielding Yen.
However, concerns about geopolitical risks, trade wars, and cautious market sentiment, may support the Yen because it is a safe asset. Investors are also limited to making major decisions ahead of key events: the Fed meeting ends on Wednesday and the BoJ makes a decision on Thursday. However, the current situation is still favorable for those who bet that the Yen will depreciate.
Yen forecast to continue to be under pressure
According to the Japanese Ministry of Finance, Japan's trade deficit in November fell sharply, from 462.1 billion yen (October) to 117.6 billion yen. This was mainly due to exports increasing by 3.8% over the same period last year, supported by a weak Yen and high demand from the US and China.
However, imports fell 3.8%, along with expectations that the BoJ will not raise interest rates this week, causing the Yen to continue to be sold off.
Meanwhile, the yield on the 10-year US Treasury note rose to its highest level in nearly a month, thanks to positive US retail sales in November, showing consumers are still spending strongly.
The US Commerce Department said retail sales rose 0.7% in November, up from 0.5% the previous month. However, sales excluding cars only increased by 0.2%, lower than expected.
While the data did not change expectations that the Fed will cut interest rates by another 0.25% at this week's meeting, there are signs that the Fed may temporarily suspend interest rate cuts in January.
Investors will pay special attention to economic forecasts and Fed Chairman Jerome Powell's speech after the meeting. After that, all eyes will be on the BoJ's policy decision on Thursday, which promises to create a big fluctuation for the USD/JPY exchange rate.
According to Lao Dong, updated at 3:00 p.m. on December 18, the USD/JPY exchange rate is currently fluctuating around 153.566 USD/JPY, meaning 1 USD can be exchanged for about 153.5 JPY.
Update the latest Yen exchange rate HERE.
