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- The Japanese Yen strengthens a bit in reaction to verbal intervention by Japanese authorities.
- The risk-off impulse further benefits the safe-haven JPY and exerts some pressure on USD/JPY.
- The hotter US CPI print on Tuesday reaffirms hawkish Fed expectations and favours the USD bulls.
The Japanese Yen (JPY) ticks higher against its American counterpart during the Asian session on Wednesday and recovers a part of the previous day's heavy losses to a three-month low. A slump below the 150.00 psychological mark prompted some verbal intervention from the Japanese authorities, which, along with the risk-off impulse, is seen lending some support to the safe-haven JPY. That said, the recent dovish remarks by the Bank of Japan (BoJ) Deputy Governor Shinichi Uchida might hold back bulls from placing aggressive bets. Apart from this, a strong bullish tone around the US Dollar (USD) might also contribute to limiting the downside for the USD/JPY pair.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, rallied to its highest level since November 14 after hot US consumer inflation figures on Tuesday lifted bets that the Federal Reserve (Fed) will keep rates higher for longer. The hawkish outlook remains supportive of elevated US Treasury bond yields, widening the US-Japan rate differential and validating the negative outlook for the JPY. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the upside. Hence, any meaningful corrective decline might still be seen as a buying opportunity in the absence of any relevant market-moving economic releases from the US on Wednesday.
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