USD/JPY: Yen surges on BOJ pivot speculation

The Japanese yen (JPY) rallied to a one-month high against the US dollar (USD) on Thursday, fueled by growing speculation that the Bank of Japan (BOJ) could abandon its negative interest rate policy this month.

At the time of writing USD/JPY was trading at 148.05, down 0.86% on the day.

The potential shift in monetary policy comes as major central banks worldwide hike rates to fight inflation, while the BOJ remains an outlier. A move away from negative rates would bolster the yen, which has weakened significantly due to the interest rate disparity.

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Adding to the yen’s strength are bets for US rate cuts later this year, as the Federal Reserve signals a dovish turn due to easing inflation data and a softening labor market.

The dollar index, which measures the greenback against a basket of currencies, hit a one-month low as the yen and other currencies appreciated.