Japan Remains Dovish

The USD/JPY currency pair has begun to step up its bullish run after it jumped over 130.00 for the first time in two decades. 

USD/JPY price chart. Source TradingView

The Japanese Yen’s value decline became more prominent following the decision of the Bank of Japan to keep supporting its absolutely loose financial policy while it also doubled down on its offer to buy an unlimited amount of the government’s bonds. Japan’s central bank left the major gear of the country’s monetary policy untampered, but it stayed with its commitment to unlimited amounts of the government’s bond at a fixed price during all trading days in order for it to defend its 0.25% yield capitalization on ten-year bonds of the Japanese government.

The dovish policy position of the Bank of Japan increased the divergence between the Japanese and American bond yields as the Federal Reserve maintained its track to increasing rates during its policy meetings in May and June at the very least.

USD Rally Strengthens in the Face of Global Economic Crisis

The continuous high rally of the US dollar is a thing, as it aids the crisis concerning oil and energy in Europe. Russia has cut off supply to Bulgaria and Poland for not paying for the commodities they get from Russia in Rubles. The decision, which took effect on Wednesday, has further weighed heavily on the Euro than ever before. However, some gas producers within the European Union are already getting set to open Ruble accounts with Russian banks so they can pay for their transactions in Russian rubles.

In China, the spread of COVID and consequent lockdown, as well as its effects on the world’s supply chain and economic growth, has kept investors and the market on an edge while everyone scrambles for safety in the safe-haven US dollar for any bets.

Traders have shown over time that they would rather hold on to the US dollar as they look forward to the American quarter one advanced Gross Domestic Product publication, which might indicate that there has been a decline in the world’s largest economy. If there is any negative print, it might then bring back concerns about a recession which will then ramp up the safe-haven demands for the dollar.

Ahead of the publication, the Governor of the Bank of Japan, Haruhiko Kuroda, is scheduled to speak at a press conference that would give new perspectives on the decline of the Japanese Yen.