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USD/JPY Fall to a Week’s Low Point, Farther Under 128.00 Benchmarks While Stock Markets Slide


Yen Sustains Safe-Haven Status

The USD/JPY currency pair has further lost strength farther under the 128.00 benchmarks in the course of the early European session. The pair fell to a low point of one week shortly before this report.

USD/JPY fought hard to consolidate on its initial moves which were positive, rather than that, it encountered new supplies in the area of 129.00 round figures as it dipped further for the second straight day on Thursday. The risk-off mood that has enveloped the market helped to increase demands for the Japanese Yen as a safe-haven asset. 

USD/JPY price chart. Source TradingView

In conjunction with new sales of the US Dollar, it applied much pressure on the USD/JPY currency pair. It now looks like the market is worried about impending aggressive monetary policies from various central banks to fight inflation and the impact they could all have on the global economy. 

The prolonged COVID lockdown in China as well as the war in Ukraine have also intensified fears that there would be a global recession.

Powell Confirms Market Bets

In turn, these fears took a toll directly on the market’s risk sentiment and it made investors seek safety in conservative safe-haven commodities which include the Japanese Yen. The flow against risks caused an average drawback in the Treasury bond yields of the US Dollar, and it resulted in some sales of the US Dollar. It equally added to the offered tone around the pair of the US Dollar and the Japanese Yen.

With the most recent drop, the price of spots has also fallen, this time, closer to its monthly low level close to the mid-127.00 zones which it reached in the past week. It is expected that the divergence between the policies of the US Federal Reserve and the Bank of Japan would continue to be a tailwind.

The US Federal Reserve is generally expected to maintain its route of monetary policy tightening and increase interest rates by 50 basis points, at least, during its next couple of meetings. The market’s speculation was confirmed by statements from the Chairman of the Reserve himself, Jerome Powell, on Tuesday. Powell said he would support interest rate increases till the price of commodities gets back to healthy levels. 

It is expected that this would reduce the fall of the bond yields of the US Dollar and the Dollar itself. But in Japan, the central bank holds on to its vow to keep buying unlimited amounts of government bonds and maintain its path of an extremely loose monetary policy. This is all a means to sustain its almost zero targets for a ten-year bond yield.

Therefore, it will be good for investors to wait out for the emergence of follow-up sales under the 127.50 area before they verify a new breakdown for bears and position for further moves. The market now looks forward to the economic dockets in the US for further directions. 

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