USD/JPY consolidates in a narrow range, manages to hold above 134.00 mark – by hareshmenghani USDJPY Recession Fed BOJ Currencies
currently placed just above the 134.00 round figure and for now, seems to have stalled Friday's modest pullback from a nearly two-month high.
Against the backdrop of looming recession risks, geopolitical tensions drive some haven flows towards the Japanese Yen and acts as a headwind for the USD/JPY pair. After firing an intercontinental ballistic missile into the sea off Japan's west coast over the weekend, North Korea launched two more ballistic missiles off its east coast on Monday. This comes amid talk of Russia ramping up attacks in Ukraine and lending some support to traditional safe-haven assets, including the JPY.
The downside for the USD/JPY pair, however, remains cushioned amid the underlying bullish sentiment surrounding the US Dollar, bolstered by the prospects for further policy tightening by the. The markets are pricing in at least a 25 bps lift-off at each of the next two FOMC policy meetings in March and May. The bets were reaffirmed last week after the US CPI and PPI data showed that inflation isn't coming down quite as fast as hoped, and hawkish comments by several Fed policymakers.
This, in turn, is holding back traders from placing aggressive bets around the USD/JPY pair ahead of the FOMCmeeting minutes, due for release on Wednesday. Investors also await Friday's testimony from the newly nominated head of the Bank of Japan Governor Kazuo Ueda for his view on the future of yield curve control and super-easy monetary policy.
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