The USD/JPY pair hovers around 149.70 after retreating from the 11-month highs of 149.82 during the early European trading session on Monday. The renewed US Dollar (USD) broadly boosts the major pair ahead of the US ISM PMI due later on Monday. However, traders might turn cautious amid the fear of possible FX intervention by Japanese authorities.
The higher for longer narratives in the US boosts the Greenback broadly. Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD relative to a basket of foreign currencies, resumes its upward path by climbing to 106.28, the highest since November last year. The Federal Reserve (Fed) Bank of New York President John Williams said on Friday that the central bank is at or near peak for the federal funds rate while mentioned that Fed will need a restrictive policy stance for some time to achieve goals, while the Fed Bank of Richmond President Thomas Barkin said that the central bank holding steady at the September FOMC meeting was appropriate and Fed has time to see data before deciding what’s next for rates.
On Friday, the Personal Consumption Expenditures (PCE) Price Index climbed 3.5% YoY in August from 3.4% in July, meeting market expectations. Meanwhile, the annual Core PCE Price Index, the Federal Reserve's preferred inflation indicator, grew 3.9% from 4.3% in July, in line with expectations.
On a monthly basis, the PCE Price Index and the Core PCE Price Index rose 0.4% and 0.1% MoM, respectively. Both of these figures fell short of experts' expectations. Additionally, Personal Income and Personal Spending rose by 0.4% on a monthly basis as expected.
Market players will take cues from the Fed’s Chair Jerome Powell's speech later in the American session on Monday. The hawkish comments from officials could boost the US Dollar (USD) and act as a tailwind for the USD/JPY pair. However, the potential FX intervention from the Japanese authorities might warn traders from the bullish bet as the pair trades near the 150.00 level, a psychological round mark, and the zone that BoJ intervened in the market last year.
Early Monday, Japanese Finance Minister Shunichi Suzuki continued with the verbal intervention. Suzuki stated that he was watching currency moves “cautiously”. BoJ Governor Kazuo Ueda said on Saturday that there was "a distance to go" for BoJ before exiting its ultra-loose monetary policy. According to the BoJ Summary of Opinions at the Monetary Policy Meeting on September 21 and 22, BOJ said that they do not need to make additional tweaks to YCC as long-term rates moving fairly stably and said that end to negative rate must be tied to the success of achieving 2% inflation target.
Market participants will monitor the US ISM Manufacturing PMI for September due on Monday, followed by the Fed Chair Powell’s speech. Later this week, the US ADP Employment Change and ISM Services PMI for September will be released on Wednesday. The attention will shift to the US Nonfarm Payrolls on Friday. These events could give a clear direction to the USD/JPY pair.
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