USD/JPY Flat Below 158.00 As Dollar Weakens, Bulls Turn Cautious

USD/JPY fluctuated in a narrow range in Asia on Wednesday, currently trading just below the 158.00 round mark. Meanwhile, USD/JPY did not fluctuate much following the release of the Bank of Japan (BOJ) minutes of its April meeting, remaining near its highest level since late April, which it retested the previous day.

The minutes showed that members of the Bank of Japan’s board discussed the risks posed by the impact of a weak yen on underlying inflation and expressed the possibility of an early rate hike if inflation exceeds expectations. However, while the sluggish price action of the US dollar (USD) continues to be bearish for USD/JPY, this did not impress yen bulls or provide a significant boost to the USD/JPY pair.

The US dollar index (DXY), which tracks the greenback against a basket of currencies, hovered near a one-week low hit on Tuesday following the release of weak US retail sales. US retail sales showed signs of fatigue among US consumers, raising market bets that the Federal Reserve (Fed) will cut interest rates later this year. This led to a drop in US Treasury yields overnight, putting dollar bulls on the defensive.

Meanwhile, Bank of Japan Governor Kazuo Ueda made hawkish comments on Tuesday, saying the central bank may raise interest rates in July depending on economic data, which supported the yen. In addition, speculation that Japanese authorities may intervene to support the currency also further weighed on USD/JPY. Any further gains in USD/JPY may continue to attract some sellers and continue to face resistance.

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