Adverse interest rate differentials are weighing on the JPY
Last week, an unusual joint statement from the US, Japanese, and South Korean authorities pledged to act against excessive currency volatility. This had an immediate easing impact on the US Dollar, which seems to have faded on Monday.
Yen's weakness helps Japanese exporters to sell their products on foreign markets but makes imports more expensive in the domestic ones. This has an inflationary impact on prices and forces the BoJ to accelerate its normalization pace. The Japanese central bank meets on Friday, after the release of the anticipated Tokyo CPI figures. Any hint on that lion at the bank’s statement might give some fresh impulse to the Yen.
In the US, the focus will be on Thursday’s first-quarter GDP figures and Friday’s PCE Prices Index data. This is the Fed’s gauge of choice to assess inflationary trends and might set the US Dollar’s near-term direction
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