The Japanese Yen draws support from a combination of factors; upside seems limited amid BoJ uncertainty
- Bank of Japan Governor Kazuo Ueda said on Monday that the economy was progressing towards sustained wages-driven inflation, leaving the door open for further monetary policy tightening.
- Ueda, however, provided few clues on whether the BoJ would raise rates in December and said that the gradual approach to adjusting policy is contingent on economic activity and price trends.
- Geopolitical uncertainties stemming from the protracted Russia-Ukraine war and the ongoing conflicts in the Middle East offer some support to the safe-haven Japanese Yen amid intervention fears.
- Japan's Finance Minister Katsunobu Kato warned last Friday that the government will scrutinize the FX market with very high vigilance and take appropriate action against excessive moves.
- A modest pullback in the US Treasury bond yields prompted some follow-through US Dollar profit-taking, after the post-US election blowout rally to a fresh year-to-date peak set last week.
- US President-elect Donald Trump's incoming administration is expected to focus on lowering taxes and raising tariffs, which could stoke inflation and limit the Federal Reserve's ability to cut rates.
- A slew of influential FOMC members, including Fed Chair Jerome Powell, recently suggested caution in cutting rates, which, in turn, favors the USD bulls and should cap the lower-yielding JPY.
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