USD/JPY soars on BoJ’s dovish stance

The USD/JPY pair has surged due to the Bank of Japan’s dovish stance, breaking away from the 140.00 range during the Asian session. The uptrend could continue based on interest rate differentials, but next week’s Fed and BoJ decisions are expected to impact the market.

The pair’s rally was driven by rumors that the Bank of Japan would not change its Yield Curve Control, causing an upward reaction. Japan’s Consumer Price Index reported a 3.3% YoY increase in June, slightly above the previous 3.2% figure but short of the anticipated 3.5%. The USD/JPY is now trading at 141.71, having dived as low as 139.74.

The US economy remains resilient, despite retail sales slowing to 0.2%. The US Initial Jobless Claims report for the week ending July 15 posted 228K unemployment fillings, causing concerns that the US Federal Reserve might react to the numbers and increase rates beyond the monetary policy decision.

A 99.8% chance of a quarter of a percent hike on July 26 is widely expected, while for September, observers expects no change.