The Japanese Yen (JPY) has seen a significant strengthening, surging by about 225 pips against the US Dollar and reaching a high not seen in over three months during the early European session on Thursday.
This surge is largely due to market expectations that the Bank of Japan (BoJ) might end its negative interest-rate policy sooner than anticipated.
This speculation has been fueled by the BoJ’s special survey among market players to evaluate the effects and consequences of its policies.
Additionally, the visit of BoJ Governor Kazuo Ueda to Prime Minister Fumio Kishida’s office has intensified expectations of a substantial shift in the bank’s policy, which has further bolstered the JPY.
On the other hand, the Federal Reserve (Fed) in the United States is anticipated to begin reducing interest rates by March 2024, prompted by diminishing inflationary pressures and indications of a relaxing labour market.
This expectation has led to a downward correction of the USD from its two-week peak reached on Wednesday, despite a notable recovery in US Treasury bond yields.
Moreover, a generally cautious market mood is also playing a role in enhancing the JPY’s appeal as a safe-haven currency.
As a result, the USD/JPY pair is moving closer to the key 145.00 level, suggesting a potential for further decline. Market participants are now awaiting the release of the US Weekly Initial Jobless Claims data for further direction, which is due later in the North American trading session.