USDJPY Analysis – December 14, 2023

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Bloomberg – The Japanese yen experienced a significant surge, crossing 142 against the dollar, marking its strongest level since late July. This rise came in response to the US Federal Reserve officials’ announcement of potential multiple rate cuts next year. According to the Federal Open Market Committee (FOMC) members’ “dot plot,” the anticipated funds rate by the end of the next year is set at 4.6%, notably lower than the earlier projection of 5.1%.

Concurrently, ahead of the Bank of Japan’s upcoming monetary policy decision, investors have reduced their expectations for interest rate increases. Bloomberg reported that Bank of Japan officials are not in a hurry to tighten monetary policy unless there is clear evidence of wage growth supporting sustainable inflation. This cautious stance is observed despite previous indications from Governor Ueda about the possibility of moving away from the central bank’s negative interest-rate policy sooner than expected.

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