The Japanese Yen draws some support from bets for an eventual BoJ policy pivot.
The uncertainty over the Fed’s rate-cut path keeps the USD bulls on the defensive.
Traders also seem reluctant ahead of the BoJ and FOMC policy meetings next week.
The Japanese Yen (JPY) struggles to gain any meaningful traction during the Asian session on Thursday and remains confined in the previous day's broader trading range against its American counterpart. The outcome of Japan’s spring wage negotiations indicated that most firms have agreed to the trade unions' wage rise demands, paving the way for an imminent shift in the Bank of Japan's (BoJ) policy stance. Apart from this, persistent geopolitical tensions lend some support to the safe-haven JPY, which, along with subdued US Dollar (USD) demand, exerts some pressure on the USD/JPY pair.
Meanwhile, the BoJ Governor Kazuo Ueda offered a slightly bleaker assessment of the economy earlier this week and cooled bets for an early interest rate hike, capping gains for the JPY. The USD, on the other hand, struggle to gain any meaningful traction as investors seek more clarity about the Federal Reserve’s (Fed) rate cut path. This further contributes to the USD/JPY pair's range-bound price move as traders now look forward to next week's key central bank event risks – the highly-anticipated BoJ decision on Tuesday and the Fed policy update on Wednesday – before placing fresh directional bets.
In the meantime, Thursday's US economic docket – featuring the release of monthly Retail Sales, the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims – might provide some impetus to the USD/JPY pair. The immediate market reaction, however, is likely to be limited, warranting some caution for short-term traders.
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