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19 April 2024 | FXGT.com

Japanese Yen Influenced by Geopolitical Tensions and Domestic Inflation Data

  • Geopolitical Tensions: The reports of Israeli military actions in Iran have triggered a significant wave of risk aversion among investors, leading them to seek refuge in safe-haven currencies, notably boosting the Japanese yen. Despite this uptick, the broader market sentiment continues to exert downward pressure on the yen, tempering its gains as the geopolitical landscape remains tense and uncertain.
  • Iran’s Response to Israeli Airstrikes: Following recent Israeli airstrikes, Iran announced that it has no immediate plans for retaliation, somewhat alleviating fears of further escalation in the Middle East. This announcement contributed to a recovery in the USD/JPY during the early European session. However, with tensions still elevated, the markets remain on edge, closely monitoring for any new developments that could influence market dynamics.
  • Japan’s Inflation Data: Japan’s National Consumer Price Index (CPI) for March rose by 2.7% year-over-year, a slight deceleration from February’s 2.8%. This metric, critical for assessing consumption trends, reflects moderate inflationary pressures in Japan.
  • Bank of Japan’s Stance: BoJ Governor Kazuo Ueda’s recent comments added to the Yen’s strength; he noted that the central bank might consider further interest rate hikes if the Yen’s depreciation significantly fuels inflation through higher import costs.
  • Quarterly Projections Awaited: Ueda also noted that the upcoming quarterly growth and price projections would detail the economic impacts of the yen’s recent declines.
  • Persistent Weakness: Despite these developments, the yen remains near a 34-year low, with BoJ board member Asahi Noguchi commenting that any future policy adjustments are expected to be gradual and less aggressive compared to other major central banks.
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