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Title: USD/JPY resists tracing firmer yields, DXY below 145.00 amid hawkish BOJ concerns

September 28, 2022 12:47 AM ET

By: AnalysisWatch

The USD/JPY has been on thin ice over the past two days, reaching 144.70 early Wednesday morning in Europe, with the yen pair not following firmer U.S. government bond yields and the U.S. Dollar Index (DXY), while also paying a bit of attention to low-risk sentiment. The reason may be related to the recent Bank of Japan (BOJ) monetary policy meeting and the BOJ's purchases of Japanese government bonds (JGB).

Nonetheless, the U.S. Dollar Index (DXY) hit a 20-year high at 114.70, while U.S. 10-year Treasury bond yields rose to 4.0% for the first time since 2010.

Earlier in the day, the BOJ released the minutes of its latest monetary policy meeting. According to the minutes, board members agreed that the inflationary impact of the yen's recent sharp swings needs to be closely examined, but policymakers reiterated their determination to keep monetary policy loose even as the yen's rapid decline has unsettled financial markets (Reuters).

On the other hand, the BOJ offered in the morning to lend 1.46 trillion yen in Japanese government bonds (JGBs) as a secondary source of supply for some issues to be settled today under an agreement expiring on Sept. 29.

On Tuesday, U.S. new orders for durable goods fell 0.2% in August versus market forecasts of -0.4% and the revised year-ago reading of -0.1%. In addition, U.S. CB consumer confidence improved for the second consecutive month in September to 108.00 versus 104.5 expected and 103.20 prior.

Amid these developments, S&P 500 futures slipped 0.50% on the day, nudging the previous day's 21-month low.

While risk-off sentiment struggles with the BOJ's defense of the yen, USD/JPY traders may be closely watching Fed Chair Jerome Powell's speech to overcome the immediate trade hurdle.

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