USD/JPY continues its upward trajectory for the second consecutive day, hovering around 154.00 during European trading hours. The ongoing rebound in the US Dollar is lending support to the currency pair, driven by positive sentiment towards the Greenback. However, the recent softness in US labor data from Friday is dampening the Dollar's strength, as investors now anticipate potential interest rate cuts by the Federal Reserve in 2024.
In remarks reported by Bloomberg, Richmond Federal Reserve President Thomas Barkin suggested that elevated interest rates could impede economic growth in the US. He noted that while higher interest rates could help curb inflationary pressures, they also need to be aligned with the central bank's 2% target. Barkin highlighted the importance of a robust labor market in confirming sustained inflation declines before considering adjustments to borrowing costs. Yet, he cautioned about persistent inflation risks in the housing and services sectors, which could sustain high price levels.
The US Dollar Index (DXY), which measures the Dollar against a basket of major currencies, is trading higher around 105.20. However, gains are being capped by softer US Treasury yields. At present, 2-year and 10-year yields on US Treasury bonds are at 4.80% and 4.45%, respectively.
Meanwhile, in Japan, Masato Kanda, Japan's chief currency diplomat, hinted at potential measures to address excessive market fluctuations earlier today. Last week, the Japanese Yen saw appreciation amid speculation of government intervention by Japanese authorities. Data from the Bank of Japan suggests that authorities may have allocated approximately ¥6.0 trillion on April 29 and ¥3.66 trillion on May 1 to stabilize the JPY.
Masakazu Tokura, Chairman of KEIDANREN (Japan Business Federation), emphasized the importance of FX rates reflecting fundamentals over the medium to long term. While uncertain about authorities intervening, Tokura acknowledged the potential timing of such actions
Paraphrasing text from "FX Street" all rights reserved by the original author.
