USD/JPY recovers its intraday losses, DXY strengthens ahead of hawkish Fed
- USD/JPY has moved above 103.00 firmly as DXY attracted bids on rate hike expectations.
- BOJ’s ultra-loose monetary policy has brought another bearish impulsive wave for yen.
- Uncertainty ahead of the Fed’s rate announcement has underpinned the risk-off impulse.
The USD/JPY pair has rebounded sharply after failing to sustain below the round-level support of 103.00. A firmer responsive buying move has pushed the asset higher from a low of 102.85 and later has supported to recover of its intraday losses. The asset has turned into a bullish open-rejection reverse day as the asset has recovered at the fullest after sensing selling pressure at open. The asset is likely to move strongly now in the remaining session.
A commitment to stick with an ultra-loose monetary policy by the Bank of Japan (BOJ) has put the Japanese yen on tenterhooks. The BOJ adopted a neutral stance on its interest rates and dictated that stimulus will remain in the pipeline to reach pre-pandemic growth rates. Moreover, higher oil and other commodity prices are widening the fiscal deficit. It is worth noting that Japan is one of the largest importers and consumers of oil in the world and higher oil prices are denting the confidence of households in Japan.
Meanwhile, the US dollar index (DXY) is trying to hold above 103.40. The asset has recovered its entire losses after witnessing decent selling pressure at the open. The asset is enjoying massive liquidity as investors are hiding amid uncertainty over the rate hike by the Federal Reserve (Fed) on Wednesday. Multi-decade high inflation levels and consistency in full employment levels are compelling Fed policymakers to vote for a jumbo rate hike.
No doubt, the event of interest rate decision announcement by the Fed will remain in the spotlight this week but investors will also focus on the release of the US Manufacturing PMI on Monday, which is seen at 58 against the prior print of 57.1.