JPY/USD Remains Within A Volatile Range Near Multi-Decade Lows

In Asia on Wednesday, the Japanese yen (JPY) exchange rate rose against the U.S. dollar, but lacked follow-up and remained within the range of shocks for the past two weeks or so. Investors remain wary as Japanese authorities may intervene to prevent a destabilizing fall in the currency. This, coupled with generally weak stock market sentiment, is a key factor supporting the safe-haven Japanese yen.

On the other hand, the greenback consolidated losses from the previous day’s retreat from five-month highs and provided modest support for USD/JPY. However, the yen appears to be struggling to gain significantly as the Bank of Japan maintains its dovish rhetoric suggesting that the next rate hike will be some time away. In contrast, markets continue to pare bets that the Federal Reserve will cut interest rates in June.

A wide gap between U.S. and Japanese interest rate policies may further disincentivize Japanese yen bulls from making aggressive bets, which should therefore help limit the downside for the USD/JPY pair. Investors will now turn their attention to U.S. economic data, namely the U.S. ADP employment change and the ISM Services Purchasing Managers Index. This, along with speeches from influential Fed members including Fed Chairman Jerome Powell, will provide fresh impetus to markets later today.

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