USD/JPY EXTENDS RECOVERY TOWARDS 151.00, FED POWELL’S SPEECH EYED

USD/JPY recovers sharply amid resilient US Dollar ahead of Powell’s speech.

Fed Bowman feels the requirement of one more interest rate increase.

A slowdown in Japan’s wage growth could delay BoJ’s plans of exiting from an easy policy stance.

The USD/JPY pair has climbed above the immediate resistance of 150.70 and is expected to recapture a two-week high near 151.50 amid strength in the US Dollar. The asset is consistently adding gains as the appeal for the US Dollar has improved ahead of the speech from Federal Reserve (Fed) Chair Jerome Powell.

S&P500 futures added nominal gains in the European session, portraying a revival in the risk appetite of the market participants. The US Dollar Index (DXY) gains for the third trading session in a row as Fed policymakers are leaning towards further policy-tightening to ensure achievement of the price stability. 10-year US Treasury yields recovered to near 4.58%.

US Fed Governor Michelle Bowman declared support for tightening policy further to ensure inflation returns to 2% in a timely manner. Bowman added that the monetary policy appears to be restrictive and some tightening in financial conditions has been contributed by higher bond yields, which could be volatile ahead.

While a few Fed policymakers support for raising interest rates further, investors still hope that the central bank is done with hiking interest rates as cracks have appeared in the US job market. The Manufacturing PMI continues to remain below the 50.0 threshold and Services PMI fell sharply in October.

On the Japanese Yen front, a decline in real wages has dampened the appeal of the Japanese Yen. Inflation-adjusted real wages dropped in September by 2.4%, which is likely to build pressure on already vulnerable consumer spending. Higher wage growth is a prerequisite for the Bank of Japan (BoJ) to exit from the expansionary policy stance.