Daily Digest Market Movers: Japanese Yen remains depressed amid reduced bets for an eventual BoJ pivot
- The Bank of Japan Governor Kazuo Ueda sounded a bit dovish last week and said that policymakers will debate whether the outlook is bright enough to phase out the massive monetary stimulus, which is seen undermining the Japanese Yen.
- The BoJ will conduct an unscheduled bond operation, offering to buy 3 trillion yen of Japanese government bonds (JGBs) in an agreement starting on Tuesday and ending on Thursday, suggesting that the BoJ's easy policy might not be over yet.
- Data released earlier this Monday showed that Machinery Orders in Japan fell more than expected, by 1.7% in January, and turns out to be another factor exerting pressure on the JPY, though the downside is more likely to remain limited.
- Rengō – Japan's largest trade union confederation – said that average wage demands topped 5% for the first time since 1994, setting the stage for the BoJ to exit the negative rates policy sooner rather than later, which should limit the JPY losses.
- Meanwhile, the hotter-than-expected US producer and consumer price data released last week forced investors to trim their bets for a more aggressive policy easing by the Federal Reserve, which continues to lend some support to the US Dollar.
- The University of Michigan's preliminary survey report showed that the US Consumer Sentiment Index ticked lower to 76.5 in March, from 76.9 in February, while one-year and five-year inflation expectations were little changed this month.
- Investors might now prefer to move to the sidelines and look to the latest monetary policy updates by the BoJ and the Fed on Tuesday and Wednesday, respectively, before determining the next leg of a directional move for the USD/JPY pair.
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