USD/JPY Surges Above 140.20 Mark Amid BoJ Rate Decision Anticipation

USD/JPY witnessed a surge above the 140.20 mark as investors eagerly awaited the Bank of Japan’s (BoJ) rate decision. Weekly data from the US Department of Labour (DOL) revealed positive figures, with Initial Jobless Claims coming in lower than expected at 228,000, the lowest reading since mid-May. However, the Philadelphia Federal Reserve Manufacturing Survey fell short of consensus, and Existing Sales experienced a contraction in June.

With the Federal Reserve (Fed) expected to raise interest rates by 25 basis points next week, the possibility of further rate hikes before year-end increased, boosting the US Dollar’s performance.

On the Japanese Yen front, Japan’s trade balance surprisingly shifted to a surplus for the first time since July 2021, easing economic recovery concerns. The National Consumer Price Index (CPI) for June also showed a slight increase of 3.3% YoY, in line with expectations.

Despite market participants anticipating a potential shift in the ultra-loose monetary policy and the BoJ’s Yield Curve Control (YCC) policy, BoJ Governor Kazuo Ueda is likely to maintain an easy-money policy, leading to the weakening of the Japanese Yen due to policy divergences.

As the market eagerly awaits the Bank of Japan’s interest rate decision next week, it is anticipated that BoJ Governor Kazuo Ueda will uphold a dovish policy stance to maintain inflation stability around 2%.