- USD/JPY touches a four-day high on Thursday, though lacks any follow-through.
- The emergence of some buying around the USD acts as a tailwind for the major.
- Reports that BoJ will raise inflation forecasts benefit the JPY and caps the upside.
The USD/JPY pair reverses an intraday dip to the 131.70-131.65 area and touches a four-day peak during the first half of the European session on Thursday. Spot prices, however, struggle to capitalize on the move and remain below the 133.00 mark, warranting caution before positioning for an extension of this week’s recovery from the lowest level since June 2022.
The emergence of some US Dollar buying turns out to be a key factor lending some support to the USD/JPY pair. That said, the prospects for smaller rate hikes by the Federal Reserve keep the US Treasury bond yields depressed near a three-week low and holds back traders from placing aggressive bullish bets around the USD. In fact, the minutes of the December FOMC policy meeting released on Wednesday showed that officials unanimously supported raising borrowing costs at a slower pace.
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