"USDJPY has recorded a notable correction in recent sessions as it retreated from the recent peak around 157.8 to 154.9, marking a temporary weakening of the USD while reflecting new expectations regarding Japan's monetary policy. This decline does not stem from a single factor, but rather from a combination of stronger signals from the Bank of Japan (BoJ) and profit-taking from previous USD long positions."
"The most important signal behind this decline comes from the BoJ as market expectations emerged that the institution may continue raising interest rates as early as December. According to Reuters, the Japanese government indicated that the cabinet is willing to accept another rate hike. This expectation alone was enough to temporarily unwind carry-trade positions using the Yen as a funding currency, creating support for a JPY rebound."
USDJPY retreated from a peak near 157.8 to 154.9, reflecting a temporary dollar weakening amid changing expectations for Japanese policy. The pullback resulted from stronger signals from the Bank of Japan and profit-taking on USD long positions. Markets priced in a potential BoJ rate increase as early as December after government comments and slightly hawkish central bank speeches, which briefly unwound Yen-funded carry trades and supported a JPY rebound. Japanese economic data remain weak, with October household spending down 3.0% year-on-year and 3.5% month-on-month. Fragile domestic demand constrains aggressive BoJ tightening, so the correction appears temporary rather than a long-term reversal.
Read at London Business News | Londonlovesbusiness.com
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