USDJPY refreshed three-week high of 113.33 on Wednesday and stays above 113.00 due to a combination of a generally stronger dollar, dovish Bank of Japan, and risk-on sentiment
As expected, the Japanese central bank left its monetary policy unchanged and reiterated that rated will remain ultralow for an extended period. The regulator has also said that risks are skewed to the downside for economy and prices. Moreover, Kuroda mentioned that the central bank is ready to adjust monetary policy if downside risks materialize. So it’s not surprising that the selling pressure on the yen has intensified after the meeting as the bank’s rhetoric was extremely dovish and has supported the riskier assets at the same time.
The greenback demand remains robust, and the pair could climb further amid the widening monetary policy divergence, signs of the improving risk sentiment and technical factors – a break above 113.00 opens the way to the previous highs around 114.50.
However, we could see some correction at this stage should investor sentiment turn sour in the short term as USDJPY looks attractive for profit-taking. Generally, considering the list of global risks ranging from trade wars to slowing growth, the yen may yet attract bulls at some point.