Ella 
During the Asian session on Thursday, the yen fluctuated within a narrow range, consolidating the decline in the yen against the US dollar (USD) since the beginning of the week. A strong earthquake in Japan on New Year’s Day makes it more difficult for the Bank of Japan (BoJ) to lift negative interest rates next week. In addition, falling inflation in the Japanese capital Tokyo and weak wage data released last week have once again confirmed market expectations that the Bank of Japan will stick to its ultra-dovish stance. This in turn is seen as a key factor weakening the yen and helping the USD/JPY pair hold near its highest levels since November 28, around the mid-148.00 level hit on Wednesday.
On the other hand, the U.S. dollar remains well supported as the chances of an imminent rate cut by the Federal Reserve (Fed) in March become increasingly slim. This expectation was reaffirmed by stronger-than-expected U.S. retail sales data, which showed signs of strong consumption and suggested that the economy remains in good shape. This in turn pushed up U.S. Treasury yields, widened the spread between U.S. and Japanese bond yields, and prompted capital outflows from the Japanese yen. At the same time, market sentiment remains fragile due to further escalation of military operations in the Middle East. This in turn favors the yen’s relative safe-haven status and limits USD/JPY’s upside.
