JAPANESE YEN ADDS TO POST-BOJ LOSSES, PLUMMETS TO FRESH YTD LOW AGAINST USD

• The Japanese Yen dives to a multi-month low in the wake of the BoJ’s dovish hike on Tuesday.
• Hawkish Fed expectations underpin the USD and lend additional support to the USD/JPY pair.
• Intervention fears might cap the major ahead of the crucial FOMC monetary policy decision.

The Japanese Yen (JPY) prolongs its downtrend against its American counterpart for the seventh straight day and drops to over a four-month low during the Asian session on Wednesday. The Bank of Japan (BoJ) raised the short-term interest rates for the first time since 2007 and scrapped its complex Yield Curve Control (YCC) policy at the end of the March meeting on Tuesday. Despite the historic move, the central bank indicated that financial conditions would remain accommodative and stopped short of offering any guidance about future policy steps, or the pace of policy normalization. This, along with the prevalent risk-on mood, continues to undermine the safe-haven JPY.

The US Dollar (USD), on the other hand, stands tall near a two-week high touched on Tuesday in the wake of expectations that the Federal Reserve (Fed) will reiterate its higher-for-longer interest rates narrative on the back of sticky inflation. The hawkish outlook remains supportive of elevated US Treasury bond yields, which results in the widening of the US-Japan rate differential and exerts additional downward pressure on the JPY. This, in turn, pushes the USD/JPY pair beyond the 151.00 round figure and supports prospects for a further appreciating move. Bulls, however, might wait for the FOMC policy decision for cues about the rate-cut path and before placing fresh bets.