Ella 
USD/JPY gained some follow-through positive momentum for the second day in a row on Friday after rallying strongly from around 144.00 the previous day. The USD/JPY Asian market maintained this momentum and returned above the 146.00 integer mark, laying the groundwork for further appreciation to challenge the yearly high hit last week.
The Japanese Yen (JPY) continued to be weighed down by a more dovish stance taken by the Bank of Japan (BoJ) as fears of imminent intervention by the authorities subsided. It is worth mentioning that Atsushi Takeuchi, who was the head of the Bank of Japan’s foreign exchange department from 2010-2012, said earlier this week that unless the yen fell below 150 against the dollar, Japan would abandon its intervention in the market. In addition, the Bank of Japan is the only central bank in the world to maintain negative interest rates. In addition, BOJ policymakers also emphasized that sustainable wage increases are a prerequisite for considering an exit from massive monetary stimulus.
Separately, data on Friday showed consumer inflation in the Japanese capital Tokyo rose less than expected in August. In fact, Japan’s Statistical Bureau reported that headline inflation in Tokyo fell to 2.9% annualized in August from 3.2% previously, but core inflation, which excludes fresh food and energy costs, remained at 4%, the highest level in more than 40 years. the highest level. That said, the data once again suggested that the Bank of Japan will stick to its ultra-loose monetary policy settings. In contrast, hawkish comments from several Federal Reserve (FED) officials overnight opened the door for a 25 basis point rate hike by the end of the year.
Boston Fed President Susan Collins said the Fed is likely to keep interest rates steady, but noted that more rate hikes are likely and that it is too early to signal a rate cut. Separately, Philadelphia Fed President Patrick Harker said the central bank must maintain a restrictive stance, adding that inflation needs to fall further to pave the way for rate cuts. That still supported a rise in U.S. Treasury yields, which pushed the U.S. dollar (USD) to its highest level since early July and provided further support for USD/JPY. However, bulls may pause ahead of Fed Chairman Jerome Powell’s speech at the Jackson Hole symposium.
Investors will look for fresh clues about the Fed’s future rate hike path from official speeches, which will play a key role in shaping the recent dollar volatility and provide fresh directional momentum for USD/JPY. That said, USD/JPY is still on track for a fourth straight week of gains and its fifth week of gains in seven. Furthermore, the fundamental backdrop still appears to remain firmly bullish and suggests that USD/JPY has the least resistance to the upside.
