- The Japanese Yen witnessed a dramatic intraday turnaround after touching a fresh 34-year low on Monday amid reports that Japanese authorities intervened in the market to support the domestic currency.
- Japan's top currency diplomat Masato Kanda refrained from confirming if there was an intervention but said that the current developments in the currency market were “speculative, rapid and abnormal”.
- The strong JPY recovery, however, lost traction in the wake of firming expectations that a significant interest-rate differential between Japan and the United States is likely to remain in place for some time.
- The Bank of Japan decided to keep its key interest rate unchanged at the end of April policy meeting last Friday and said that it will continue buying government bonds in line with the guidance made in March.
- The BoJ lowered its economic growth forecast for the current fiscal year 2024, while data on Monday showed that inflation in Tokyo slowed for the second month in April, raising doubts about further policy tightening.
- The Federal Reserve is expected to keep rates higher for longer, and the bets were reaffirmed by Friday's release of the Personal Consumption Expenditures (PCE) Price Index, which pointed to sticky inflation.
- Data released from Japan this Tuesday showed that the unemployment rate held steady at 2.6% in March as compared to the 2.5% anticipated, while Industrial Production grew by 3.8% during the reported month.
- Meanwhile, Japan's Retail Sales declined by 1.2% in March and the yearly rate, though recorded a slower-than-expected rise, pointed to expansion for the 25th consecutive month, doing little to influence the JPY.
- Traders now look to the US economic docket – featuring the Chicago PMI and the Conference Board's Consumer Confidence Index — for short-term opportunities ahead of the FOMC policy decision on Wednesday.
- Apart from this, important US macro data scheduled at the beginning of a new month, influencing the monthly jobs data, should influence the USD price dynamics and provide a fresh impetus to the USD/JPY pair.
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