Anna 
The Japanese yen (JPY) exhibited a resilient stance early in European trading on Thursday, seemingly concluding a two-day losing streak against the US dollar (USD), which is currently trading in proximity to monthly lows. The intraday gains in the yen could be attributed to repositioning trades ahead of the eagerly anticipated U.S. consumer inflation data. This data is expected to provide valuable insights into the Federal Reserve’s future policy decisions, consequently influencing demand for the dollar.
The uncertainty surrounding the timing of the Federal Reserve’s initiation of interest rate cuts has kept dollar bulls on the defensive, contributing to the yen’s strength. However, substantial appreciation for the yen remains elusive, given the Bank of Japan’s (BoJ) commitment to its ultra-dovish monetary policy, supported by government stimulus efforts following a devastating earthquake in Japan. The recent release of falling inflation in Tokyo and weak wage data earlier in the week reinforces market expectations that the BoJ is unlikely to depart from its negative interest rate regime in the near term.
Despite these factors, the generally positive tone prevailing in equity markets has somewhat curtailed the gains in the safe-haven Japanese yen and offered support to USD/JPY. Investors, in light of the looming key U.S. Consumer Price Index (CPI) report, appear hesitant to take significant actions and remain cautious in anticipation of potential market shifts and increased volatility. The delicate balance between global economic factors and market sentiment continues to shape the dynamics of the USD/JPY pair, creating an environment where investors tread carefully.
