USD/JPY rebounds following a massive over 500 pips intraday slump, back around mid-141.00s

Things May Soon Get Better In The Chinese Markets
  • USD/JPY retreats sharply from a fresh 24-year peak after Japan intervenes in the FX market.
  • The intraday USD corrective pullback from a two-decade high contributes to the steep decline.
  • Rising US bond yields, the Fed-BoJ policy divergence limits any further losses, at least for now.

The USD/JPY pair witnessed a dramatic intraday turnaround on Thursday and plunges over 550 pips from the vicinity of the 146.00 mark, or a fresh 24-year high touched this Thursday. The pair maintains its heavily offered tone through the early European session and hits a nearly three-week low in the last hour, though rebounds thereafter.

Japanese authorities intervened in the forex market for the first time since 1998 to stem the rapid decline in the domestic currency and trigger a massive sell-off around the USD/JPY pair. The strong intraday rally in the Japanese yen gives the US dollar bulls to take some profits off the table, especially after the recent strong run-up to a two-decade high. This was seen as another factor that aggravated the bearish pressure surrounding the major.

That said, a recovery in the risk sentiment, as depicted by a generally positive tone around the equity markets, should keep a lid on any further gains for the safe-haven JPY. Apart from this, a fresh leg up in the US Treasury bond yields, bolstered by a more hawkish stance adopted by the Federal Reserve, supports prospects for the emergence of some USD dip-buying. This, in turn, assists the USD/JPY pair to rebound over 100 pips from the daily low.

It is worth recalling that the Fed raised interest rates by another 75 bps on Wednesday and signalled more large rate increases at its upcoming policy meetings. In contrast, the BoJ left its policy settings unchanged and reiterated that it will continue powerful monetary easing. This marks a big divergence in the Fed-BoJ policy outlooks, which has been a key factor behind the yen's slump of over 25% against its American counterpart since the beginning of 2022.

Things May Soon Get Better In The Chinese Markets

FXStreet News

FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market and was founded in 2000.
The website offers a wide range of tools and resources: 24/5 currency news, real-time economic calendar, advanced rates and charts, educational webinars, analysis reports, forecasts, Learning Center, newsletters, industry services, FX customizable studies...
As its distinctive trademark, the portal has always been proud of its unyielding compromise to provide neutral and unbiased information and to enable its users to take better and more confident decisions. FXStreet has managed to gain the collaboration of the entire Forex industry, from individual professionals and small companies right up to Forex Brokers and Investment Banks. FXStreet covers the FX Market 24/5: an expert team of journalists, traders and economists picture what the market is doing and what is happening as it happens.