November 9, 2022 08:29 AM ET
By:AnalysisWatch
USD/JPY attracts some buying near 145.15 and recovers from a near two-week low hit on Wednesday. The intraday rally accelerates during the early North American session, pushing spot prices to a new daily high near the mid-146.00s amid reviving demand for the US dollar.
Despite the diminishing odds of more aggressive Fed policy tightening, markets are still betting on an interest rate hike of at least 50 basis points in December. This continues to support elevated U.S.
Treasury yields and helps the dollar index, which measures the greenback's performance against a basket of currencies, move away from a multi-week low set on Tuesday.
On the other hand, the Japanese yen continues to be weighed down by the fact that the Bank of Japan has so far shown no intention of raising interest rates. In addition, the Bank of Japan remains committed to keeping the 10-year bond yield at zero, which widens the rate differential between the United States and Japan. This, in turn, supports the prospects for further appreciation of the USD/JPY.
Traders also seem reluctant and may prefer to wait for a further catalyst from the latest US consumer inflation figures, due for release on Thursday. The crucial US CPI report will play a key role in determining the Fed's rate hike cycles, which in turn should determine the near-term trajectory of the greenback and the USDJPY pair.
Meanwhile, on Wednesday, traders will be guided by speeches from influential FOMC members in the absence of market-relevant economic releases. On the other hand, US bond yields and overall market risk sentiment should allow traders to take advantage of short-term opportunities in the USD/JPY pair.