USD/JPY poised for further loss below 109 amid subdued dollar
- USD/JPY consolidates the previous day’s losses in the Asian session.
- A sell off in the US dollar weighs on the pair.
- US FOMC in focus for the week.
The intense selling pressure in the US dollar dragged USD/JPY below 109.00 in the New York session. The pair fell for the straight fourth session on Tuesday, finding it difficult to hold above 109 level for the time being.
At the time of writing, USD/JPY is trading at 108.92, up 0.04% on the day.
The move was primarily sponsored by the depreciative move in the US dollar Index (DXY), which tracks the performance of the greenback against its counterpart. The DXY fell sharply from the highs of 109.29 and made a low of 108.83. The US dollar followed the stalled US Treasury yields amid expectations that the Federal Reserve would not tighten monetary policy soon.
US Fed officials continuously downplayed inflationary fear, and did not expect interest rates to rise until next year. The statements were echoed by the weak US Housing data reports. Housing dropped by 9.5% in April, whileBuilding Permits increased modestly at 0.3%. The subdued data reduces investor’s risk appetite.
On the other hand, the Japanese economic data released on Friday showed that the Japanese economy shrank more than expected in Q1 at 1.3% after a previous 2.8% growth. This raised doubts about the fragile economic recovery. The country struggled to contain the infections and speed up its vaccination rollout.
The yen gains on its safe-haven appeal, as investors find it much safer to invest in safer instruments in the time of uncertainties.
Meanwhile, investors keenly await the release of the Federal Reserve’s Meeting Minutes to get a clue on the central bank’s thoughts about the pricing pressure.
USD/JPY Additional Levels