USD/JPY edges higher to near 157.60 in Wednesday’s early Asian session. The recent rate hike by the Bank of Japan was accompanied by two dovish dissents, which has exerted downward pressure on the Japanese Yen. Potential currency intervention from Japanese authorities may assist in curbing the JPY’s depreciation. The USD/JPY pair exhibits an upward momentum, reaching approximately 157.60 in the early hours of trading on Wednesday in the Asian market. The Japanese Yen extends its decline due to a lack of explicitly hawkish guidance from the Bank of Japan following the rate hike last week. The preliminary reading of the Purchasing Managers’ Index from the US is set to be released later on Wednesday. Last week, the BoJ raised its policy rate by 25 basis points (bps) to 1.25%, marking its highest level since 1995. However, the vote was 7-2, with board members Toichiro Asada and Ayano Sato dissenting. Markets interpret the dissent from two policymakers as a signal that further rate hikes could face increased challenges, putting downward pressure on the JPY.
In response to enquiries regarding the potential for consecutive rate hikes or more substantial adjustments, Bank of Japan Governor Kazuo Ueda indicated that the central bank would not preclude any specific policy alternatives prior to board meetings. “Ueda’s press conference showed snippets of hawkishness, but they were insufficient to support the market’s aggressively hawkish expectations”, said Chidu Narayanan. Traders are vigilant regarding potential currency intervention by Japanese authorities aimed at supporting the Japanese Yen. Source reported last week that Japanese officials conducted rate checks. A rate check involves authorities soliciting currency quotes from banks to assess market conditions, which traders interpret as a potential precursor to currency intervention. Strategists acknowledge that the BoJ’s recent “7-2 vote split in favour of a rate hike may remain a near-term headwind for the JPY,” with the divided board likely to temper immediate currency support. However, they stress that “the more important takeaway is that the BoJ appears increasingly willing to tighten policy at a faster pace.” In their view, this evolving stance “should ease concerns that the BoJ is falling behind the curve,” reinforcing expectations that a more proactive policy path will gradually underpin the Yen even if short-term volatility persists.
Fed’s Collins delivered a notably more hawkish tone, with an FXS Speechtracker score of 8.1/10 compared to the established baseline of 6.6/10, underscoring stronger conviction behind recent policy moves. By explicitly supporting last week’s rate hike and warning of an increased likelihood that inflation remains significantly above 2%, Collins articulated a policy stance that emphasises a prompt return to price stability, given the improved conditions in the labour market. The emphasis on a “somewhat more restrictive” federal funds rate indicates a tendency to maintain elevated rates for an extended period, a communication generally favourable to the Dollar and detrimental to risk-sensitive assets. The FXS Fed Sentiment Index increased by 0.53 points to 150.49, indicating that the overall communication from the Federal Reserve continues to be decisively hawkish, significantly surpassing the neutral threshold of 100. In conjunction with the heightened FXS Speechtracker score, this action indicates that Federal Reserve communications are progressively converging on the necessity for a restrictive policy to sustainably bring inflation back to target, a scenario that is likely to support the Dollar against lower-yielding currencies.
In the daily chart, USD/JPY remains within a wide range, positioned beneath the 100-day moving average while maintaining a position above the midline of the 20-day Bollinger simple moving average. This configuration indicates that the pair is consolidating between trend resistance and near-term band support, while the Relative Strength Index at 53.01 leans slightly toward the bullish side without signalling overbought conditions. On the topside, initial resistance is observed at the 100-day moving average at 159.55, with the upper Bollinger band at 160.85 serving as the subsequent barrier should buyers regain momentum. On the downside, immediate support emerges at the Bollinger SMA midline near 156.55, ahead of a deeper structural floor at the lower Bollinger band around 152.25, where a stronger corrective phase would likely pause.
