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The USD/JPY pair trades on a weaker note near 153.90 during the early Asian session on Tuesday. The pair trims gains after retreating from 153.35 amid the risk-off mood and rising speculation of a rate hike by the Bank of Japan (BoJ). The BoJ and Federal Reserve (Fed) Interest Rate Decision on Wednesday will take center stage ahead of US employment data on Friday.
The markets don’t expect the US Fed to cut the interest rate at its July meeting this week, but they expected the Fed officials to set the stage for an easing policy at its September meeting. Traders are now pricing in 100% odds of a Fed rate cut by at least a quarter percentage point in September, according to data from the CME FedWatch Tool. The rising bets on the Fed rate cut continue to weigh on the Greenback against the Japanese Yen (JPY) in the near term.
On the other hand, a Reuters poll of economists anticipates the Japanese central bank will raise rates by 10 basis points (bps) to 0.1%. ING noted that the BoJ might lift rates by 15 bps and reduce its bond-buying program simultaneously. OCBC FX strategists said, “The combination of BoJ policy normalization and Fed possibly cutting rate in due course is a case of monetary policy convergence and should underpin USD/JPY downside.”More By This Author:GBP/JPY Remains On The Defensive Below 198.00 Amid Expectations For BoJ Rate Hike USD/CAD Trades With Mild Bearish Bias Near 1.3800, Eyes On US PCE Data NZD/USD Remains Weak Below 0.5900, All Eyes On US PCE Data
