USD/JPY trades in a narrow range below 160 on Thursday, with neither side able to build strong momentum.
The US Dollar (USD) is struggling to extend Wednesday’s recovery, while persistent weakness in the Japanese Yen (JPY) continues to keep the pair supported
At the time of writing, USD/JPY trades around 159.30. The Yen remains one of the weaker major currencies as Japan’s low interest-rate environment and concerns over the country’s fiscal outlook continue to weigh. Expectations that the Bank of Japan (BoJ) could raise rates as soon as September have so far failed to trigger a sustained recovery in the currency.
Strategists at Brown Brothers Harriman note that USD/JPY “remains entrenched between resistance at 160 and support at the 200-day moving average (158.40),” with the pair effectively range-bound as policy signals from Japan evolve. They highlight comments from BoJ Deputy Governor Ryozo Himino, who “stuck to the bank’s hawkish guidance” and stressed that “raising rates in a timely manner will help avoid a spike in inflation and abrupt rate hikes in the future,” adding that “we should pay greater attention to the upside risk to prices than in the past.” Still, traders appear reluctant to push USD/JPY decisively above 160 amid fears of another intervention after coordinated action by Japan and the United States in late July, when the pair climbed to a 40-year high near 164. On the US side, the Greenback is holding on to Wednesday’s recovery after the latest Personal Consumption Expenditures (PCE) Price Index showed that inflation remains stubbornly above the Federal Reserve’s (Fed) 2% target.