The USD/JPY currency pair had a time of trading with an averagely positive bias in the early session in Europe. The currency pair was observed to be hovering in the vicinity of the mid-130.00 area. The pair’s current spot is just a few points under the weekly trading high point.
Reports show that the pair’s hourly average earnings increased by 0.3% month-on-month in April instead of 0.4%, which was expected. It also increased by 5.5% year-on-year, which was the same forecast posted for it.
The price of spots consolidated on the favorable rebound it had on Thursday from the area of the weekly low it fell to. The scale jumped on Friday as the second day in a row of the price going higher. The increased difference in the economic policies of the US Federal Reserve and the Bank of Japan advanced the USD.JPY currency pair.
USD/JPY price chart. Source TradingView
There are a number of factors that have been playing different roles and have been a tailwind to the USD/JPY pair. The Chairman of the Federal Reserve pushed aside the likelihood of a more aggressive monetary policy tightening. However, Powell stated that policymakers at the Reserve are willing to approve a 50 basis points interest rate increase at subsequent meetings.
Importantly, market players are pricing in up to 200 basis points of interest rates by the Federal Reserve before the end of the year. The pricing by the market gained more support from increased Treasury bond yields in the US.
Meanwhile, in Japan, the Bank of Japan holds on to its promise of maintaining the loose monetary policy it has adopted. The bank is also going ahead with its plans to buy unlimited amounts of the Japanese government’s bonds. It embarked on this policy in order to defend its plans of having an almost zero increase in long-term interest rates.
Dovish Commitment of the BOJ
The Bank of Japan’s monetary policy also contributed to giving support to the USD/JPY pair. Nevertheless, the policy sent a soft risk tone around the Japanese Yen, and it undermined the currency’s safe-haven status and drove funds away from it. It also capped any further gains for the currency.
Equally, there seemed to be an air of reluctance around investors as they rather wait by the side while they wait for the jobs report coming from the US. The American jobs report is set to be published later in the course of the North American session.
The Non-farm Payroll report, as well as the bond yield of the US, are eyed to be of influence to the US Dollar. They are also speculated to give new impetus and direction to the USD/JPY currency pair.
The basic background of the pair indicates that any significant pullback could be an opportunity to buy more. Moreover, the USD/JPY currency pair remains on track to still post some gains for a ninth consecutive week. If it happens, this would be its highest close of the week since April 2002.