Anna 
The USD/JPY pair has strengthened for the third consecutive trading day, finding support in a robust US Dollar (USD). The prevailing market sentiment is leaning towards the likelihood that the Federal Reserve (Fed) may not implement rate cuts in the upcoming March and May meetings. This sentiment has been bolstered by positive data on consumer and producer prices released last week. As of the early European session on Tuesday, the USD/JPY pair is trading higher around 150.30.
ANZ has put forth a forecast indicating that the Federal Reserve (Fed) might initiate a rate-cutting cycle starting from July, adding that there is a 53% probability of a 25 basis points rate cut by the US Fed in the June meeting, according to the CME FedWatch Tool.
The US Dollar Index (DXY), a measure of the USD against six other major currencies, has broken a four-day losing streak, trading higher around 104.30. The 2-year and 10-year yields on US bond coupons stand at 4.64% and 4.29%, respectively, at the time of writing.
On the Japanese side, Atsushi Mimura, an official from the Japanese Finance Ministry, stated on Tuesday that the government is actively communicating and coordinating with other countries regarding foreign exchange (FX) intervention. He highlighted the importance of maintaining safety and securing liquidity in the management of FX reserves. Mimura mentioned that the government can sell assets such as savings and foreign bonds in FX reserves when intervention is deemed necessary.
Finance Minister Shunichi Suzuki also expressed concerns about the negative implications of a weak Yen, stating that while a weak Yen has both advantages and disadvantages, he is more concerned about the downsides. Suzuki further remarked that the Bank of Japan (BoJ) holds jurisdiction over monetary policy, but he anticipates a time when interest rates will rise.
Market participants are gearing up for the release of Trade Balance data, including Import and Export figures for January on Wednesday. Additionally, the focus will shift to the Federal Open Market Committee’s (FOMC) meeting minutes, as traders seek insights into the future trajectory of US interest rates. The combination of these factors will likely influence the direction of the USD/JPY pair in the coming sessions.
