USD/JPY bounces off multi-month low, keeps the red above 138.00 amid weaker USD – by hareshmenghani USDJPY Fed Bonds Coronavirus Currencies
The US Dollar fails to capitalize on its modest intraday uptick and comes under heavy selling pressure amid the prospects for a less aggressive policy tightening by the. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, dives back closer to the monthly low and turns out to be a key factor exerting pressure on the USD/JPY pair.
The November FOMC meeting minutes released last week cemented bets for a relatively smaller 50 bps rate hike by the US central bank in December. This is reinforced by the ongoing downfall in the US Treasury bond yields, narrowing the US-Japan rate differential. Apart from this, the risk-off mood benefits the safe-haven Japanese Yen and contributes to the USD/JPY pair's intraday decline.
Investors remain worried about a new COVID-19 outbreak in China and the imposition of strict lockdown measures in several cities. Furthermore, a wave of protests in China over the government’s zero-COVID policy takes its toll on the risk sentiment. Apart from this, technical selling below last week's swing low, around the 138.00 mark, aggravates the bearish pressure surrounding the USD/JPY pair.
That said, the Fed-BoJ policy divergence helps limit deeper losses and assists spot prices to find decent support near the mid-137.00s, at least for the time being. In the absence of any relevantfrom the US, traders on Monday will take cues from speeches by influential FOMC members - St. Louis Fed President James Bullard and New York Fed President John Williams..
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