USD/JPY Fundamental Daily Forecast – Traders Reacting to Dip in U.S. Treasury Yields

James Hyerczyk
Japanese Yen
Japanese Yen

The Dollar/Yen is trading weaker in response to a drop in U.S. Treasury yields. U.S. government debt prices, which move inversely to yields, were trading higher on Tuesday, as investors turned their focus to the series of Fed member speeches.

At 1028 GMT, the USD/JPY was trading 112.340, down 0.333 or -0.29%.

USDJPY
Daily USDJPY

The yield on the benchmark 10-year Treasury Note was sitting lower at around 2.351 at 1010 GMT, while the yield on the 30-year Treasury bond was down at 2.891 percent.

Early today, Minneapolis Fed President Neel Kashkari is set to speak at the Regional Economic Conditions conference in Minneapolis, Minnesota.

Later in the session, Dallas Fed President Robert Kaplan is scheduled to speak at a Stanford Institute for Economic Policy Research associates meeting.

Traders will be listening for any comments about monetary policy and the Fed’s plan to raise interest rates a third time this year in December.

Kashkari is a dove. He would rather wait for inflation to hit the Fed’s 2 percent target before raising interest rates.

Kaplan seems a bit hawkish. Last Friday, he said he’s “open minded” about an interest rate hike in December, but he’s “not there yet.”

In other news, the Bank of Japan raised its assessment of four of the country’s regional economies due to strong exports, consumer spending and construction, an encouraging sign that the broader economy can continue to grow at a healthy pace.

Additionally, BOJ Governor Haruhiko Kuroda on Tuesday reiterated the central bank’s resolve to maintain its massive stimulus program until inflation moved sustainably above its 2 percent price target.

He also said inflation was likely to gradually accelerate towards 2 percent due to improvements in the output gap and inflation expectations.

The direction of the USD/JPY today is likely to be determined by trader reaction to the short-term technical area at 112.448 to 112.216.

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