TOKYO - The USD/JPY currency pair showcased resilience in Asian session on Wednesday, stabilizing above its three-month lows in the mid-147 range. This steadiness comes as US Treasury yields experience slight increases and the Bank of Japan's (BoJ) Deputy Governor Ryozo Himino maintains a dovish stance, emphasizing the continuation of easy monetary policies until Japan's price stability targets are achieved.
The dollar's position was bolstered by a modest uptick in US Treasury yields, which often influence the currency's value. Despite this, the greenback displayed signs of weakness due to growing investor expectations of a potential Federal Reserve rate cut in early 2024. These expectations are fueled by a mix of economic reports that suggest a shifting economic landscape.
Adding to the complex economic picture, Tokyo’s Core Consumer Price Index (CPI) rose by 2.3% in November. This increase has led to market speculation about a possible shift away from the BoJ's longstanding negative interest rate policy.
Tuesday's trading session was marked by significant volatility for the USD/JPY pair, which dipped to a low of 146.56 but managed to recover, closing nearly flat at 147.20. The initial drop in the US dollar was triggered by lower-than-expected JOLTS Job Openings data, hinting at a cooling labor market. However, the currency found support following a robust US ISM Services PMI report, which came in at 52.7.
Market participants now look ahead with keen interest to the upcoming ADP (NASDAQ:ADP) Employment Change data, seeking further evidence of labor market conditions. This data is considered a precursor to Friday's crucial Non-Farm Payroll (NFP) figures, which could provide additional insights into the health of the US economy and influence Federal Reserve policy decisions moving forward.
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