• The Japanese Yen drifts lower on Friday and retreats further from over a two-week high.
• The BoJ policy uncertainty and the risk-on environment undermine the safe-haven JPY.
• Firming expectations for a June Fed rate cut move might cap the upside for the USD.

The Japanese Yen (JPY) strengthened sharply against its American counterpart and shot to over a two-week high on Thursday after the Bank of Japan (BoJ) board member Hajime Takata dropped the clearest hint of a looming rate hike. That said, the BoJ Governor Kazuo Ueda sounded a bit cautious and tempered speculations about an imminent shift in the policy stance. Moreover, investors seem convinced that a recession in Japan could force the BoJ to delay its plan to pivot away from the ultra-loose policy. This, along with an extension of the recent risk-on rally in the equity markets, kept a lid on any further gains for the safe-haven JPY.

Apart from this, the emergence of some US Dollar (USD) buying assisted the USD/JPY pair to rebound around 75 pips from the 149.20 area and gain some positive traction during the Asian session on Friday. Meanwhile, the US Personal Consumption Expenditures (PCE) Price Index for January matched expectations and showed that the annual increase in inflation was the smallest in nearly three years. This reaffirmed market bets that the Federal Reserve (Fed) will start cutting interest rates at the June policy meeting. This could hold back the USD bulls from placing aggressive bets and cap any further upside for the currency pair