The Japanese Yen (JPY) drifts lower against its American counterpart for the second straight day on Wednesday and retreats further from a one-week high touched the previous day.
Bank of Japan (BoJ) Governor Kazuo Ueda's cautious remarks on Tuesday fueled speculations that the next interest rate hike won't come soon. This, along with a generally positive risk tone, is seen undermining the safe-haven JPY.
Apart from this, a modest US Dollar (USD) uptick assists the USD/JPY pair to trade with a mild positive bias above the 144.00 mark during the Asian session.
Meanwhile, an upward revision of Japan's Services PMI, along with expectations that higher wages will boost inflation, keeps the door open for another interest rate hike by the BoJ in 2025. Moreover, persistent geopolitical risks and trade uncertainties could lift deeper JPY losses.
The USD, on the other hand, might struggle to gain any meaningful traction amid bets that the Federal Reserve (Fed) will lower borrowing costs further.
This marks a big divergence in comparison to hawkish BoJ expectations, which might further benefit the lower-yielding JPY and cap the USD/JPY pair.
Source: Fxstreet
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