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USD/JPY Fundamental Daily Forecast – Yen Surges in Reaction to Fed’s Vow to Hold Rates Lower Over Long Run

By:
James Hyerczyk
Published: Sep 17, 2020, 10:10 UTC

BOJ Governor Haruhiko Kuroda explains how the central bank would coordinate monetary policy with the new Suga administration.

USD/JPY

The Dollar/Yen is trading lower on Thursday, following yesterday’s steep plunge that was fueled by the U.S. Federal Reserve’s monetary policy decisions, economic projections and comments from Federal Reserve Chairman Jerome Powell. Earlier in the session, the Bank of Japan also released its latest monetary policy decisions.

At 09:49 GMT, the USD/JPY is trading 104.748, down 0.234 or -0.22%.

Fed Releases Monetary Policy Statement

The U.S. Federal Reserve released its monetary policy statement at 18:00 GMT on Wednesday. Central bank policymakers kept interest rates pinned near zero and promised to keep them there until inflation is on track to ‘moderately exceed” the U.S. central bank’s 2% inflation target “for some time.”

The change in guidance was in line with the Fed’s monetary policy shift announced last month that is aimed to offset years of weak inflation and allow the economy to keep adding jobs for as long as possible.

This week’s Federal Open Market Committee (FOMC) meeting was the last before the U.S. Presidential election in November and contained a multitude of information that affects both the short-term and long-term aspects of the economy as well as across all markets from commodities to stocks.

Bank of Japan Holds Policy Steady

The Bank of Japan kept its monetary policy steady on Thursday and said the country’s economy “remains in a severe state but has started to pick up,” suggesting no immediate stimulus was needed to support activity.

Suga Elected New Prime Minister

The BOJ policy decision came after Yoshihide Suga, a long-time aide of Shinzo Abe who pledged to continue “Abenomics” to recover employment, was officially elected as Japan’s new prime minister on Wednesday.

Traders are also reacting to BOJ Governor Haruhiko Kuroda’s remarks about how the central bank would coordinate monetary policy with the new Suga administration.

Daily Forecast

The USD/JPY remains under pressure as investors adjust their portfolios to reflect the dovish Federal Reserve, which on Wednesday vowed to keep interest rates near zero until inflation is on track to overshoot the U.S. central bank’s 2% price target. The news is helping to widen the spread between U.S. Government Bond yields and Japanese Government Bond yields, making the Japanese a more attractive investment.

Additionally, the U.S. stock market weakness is increasing the Japanese Yen’s appeal as a safe-haven asset.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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