Additionally, the recent agreement between Israel and Hamas to pause fighting has limited the upside potential for the JPY as a safe haven currency. Interestingly, the recent weakening of the USD may reduce the need for the Bank of Japan (BOJ) to intervene in the foreign exchange (FX) markets if this trend continues.
Furthermore, Japanese government officials have downgraded the economic outlook for Japan, citing drained domestic demand, which has harmed the yen. During his address to Parliament, Japanese Prime Minister Fumio Kishida clarified that the Bank of Japan’s monetary policy is not designed to manipulate foreign exchange rates in a specific direction.
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Instead, the government expects the BOJ to implement appropriate monetary policies and maintain an open line of communication with the government. Regarding market reaction, Kishida’s remarks had a limited impact on the Japanese Yen (JPY) and did not provide significant momentum to the USD/JPY pair.
On Tuesday, the USD experienced a slight upward movement, rebounding from its nearly three-month low. This was in response to the hawkish tone of the FOMC minutes, which revealed that policymakers are inclined to maintain higher interest rates for an extended period to combat inflation.
The USDJPY currency pair was trading up 99.9 pips (0.67%) as the US dollar rallied higher against the Japanese yen during the North American session. The dollar’s rally ended the yen’s recent resurgence that had seen the pair fall to lows of 147.20.
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