Yen Pressured As Fed Signals Fewer Rate Cuts, Boj Holds Steady

(MENAFN- Investor Ideas) Investorideas, a go-to platform for big investing ideas releases market commentary from Ruben Ferreira - Head of Portuguese Operations at FlowCommunity.

The Japanese Yen declined following monetary policy decisions and remarks from the Federal Reserve and the Bank of Japan (BoJ). The Federal Reserve implemented a widely anticipated 25-basis-point rate cut, paired with a hawkish outlook from Chair Powell. He tempered expectations for rate cuts in 2025, projecting only two reductions. Upgraded economic forecasts and an improved unemployment outlook in the U.S. supported the dollar, with markets now anticipating a pause in rate adjustments at the Fed's January meeting.

In contrast, the BoJ maintained its policy stance, leaving rates unchanged and avoiding hints of potential hikes in early 2025. Governor Kazuo Ueda emphasized the importance of flexibility, citing uncertainties around inflation and broader economic conditions. This cautious approach pushed the Yen to its lowest level since July, highlighting the gap between the two central banks' policies.

On the bond markets, the U.S. 10-year note yield broke above the 4.5% mark, reflecting the changing monetary policy expectations. Japanese yields saw some volatility as markets reacted to the comments of the BoJ. Unless the BoJ signals a shift toward tightening or U.S. economic data disappoints, the Japanese currency is likely to stay under pressure. Market participants now await key U.S. economic data, including Q3 GDP growth and PCE inflation, which could drive further currency market volatility.

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