JPY Languishes Near Multi-Decade Lows Against US Dollar Amid Central Bank Cautiousness

As the European session unfolds on Tuesday, the Japanese Yen (JPY) continues its sideways movement against its American counterpart, hovering near multi-decade lows. The Bank of Japan’s (BoJ) cautious stance on monetary policy, coupled with uncertainty surrounding future rate hikes, contributes to the Yen’s subdued performance. Additionally, speculations suggesting a potential delay in interest rate cuts by the Federal Reserve (Fed) indicate that the interest rate differential between the US and Japan will remain wide. This, combined with a prevailing positive sentiment in equity markets, dampens demand for the safe-haven JPY.

On the other hand, the US Dollar (USD) finds support from elevated US Treasury bond yields, bolstered by reduced expectations for the total number of Fed rate cuts in 2024. This factor serves as an additional tailwind for the USD/JPY pair. However, investors remain vigilant amid concerns that Japanese authorities may intervene in the market to prevent a significant decline in the domestic currency.

Such interventions help mitigate losses for the JPY, with traders closely eyeing the release of US consumer inflation figures and the Federal Open Market Committee (FOMC) minutes on Wednesday for potential market-moving catalysts.

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