JPY/USD Continues To Consolidate Near Multi-Decade Lows

The Japanese yen (JPY) continued to struggle to post a meaningful recovery during the Asian session on Wednesday, hovering near multi-decade lows against the US dollar. Traders now appear to be choosing to await a key policy decision from the Bank of Japan (BoJ) on Friday. In addition, investors this week will also welcome the preliminary first-quarter gross domestic product (GDP) and personal consumption expenditures (PCE) price index of the United States released on Thursday and Friday respectively. The combination of key central bank event risks and important US macro data will play a key role in determining the next directional move of USD/JPY.

At the same time, expectations that the interest rate gap between the United States and Japan will continue to widen, along with a generally positive risk tone, will continue to undermine the safe-haven value of the yen. However, speculation that Japanese authorities will intervene to support the currency has prevented aggressive bets on a yen bear market. Elsewhere, the U.S. dollar (USD) remained near its lowest level in more than a week following Tuesday’s disappointing U.S. Purchasing Managers’ Index (PMI), another factor weighing on the USD/JPY pair. Nonetheless, hawkish expectations from the Federal Reserve should act as a “positive” for the dollar and limit the pair’s downside.

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