After the Bank of Japan cut its growth prediction for the current fiscal year, the USD/JPY gained some traction.
The dollar was bolstered by rebounding US government rates, which remained supportive of the small gain.
COVID-19 concerns continued to give the safe-haven JPY some support and halted the rise.
Through the early European session, the USD/JPY pair maintained its intraday gains, with bulls hoping for a sustained advance beyond the important 110.00 psychological level.
On the penultimate trading day of the week, the pair regained some positive traction and, for the time being, appears to have ended a two-day losing run. The Japanese currency fell as the Bank of Japan cut its growth prediction for the current fiscal year, which ends in March 2020, from 4.0 percent to 3.8 percent, down from 4.0 percent in April. As a result, the USD/JPY pair was perceived as receiving some support as a result of this.
However, the Bank of Japan raised its prediction for the coming fiscal year, expecting the economy to expand 2.7 percent, up from 2.4 percent previously, on the assumption that consumption will rise up as vaccines become more widespread. At its July monetary policy meeting, the Bank of Japan opted to retain its benchmark policy rate at -10 basis points, as well as its vow to buy J-REITS at a rate of up to JPY180 billion per year.
Bullish traders were also encouraged by a little increase in US Treasury bond yields, which supported the US dollar. Expectations that the Fed may tighten policy sooner than expected in response to rising inflationary pressures acted as an additional tailwind for the greenback. COVID-19 concerns, on the other hand, continued to underpin the safe-haven JPY, limiting gains for the USD/JPY pair.
Market players are now anticipating the publication of monthly Retail Sales statistics later in the early North American session, which will be a highlight of the US economic calendar. This, combined with US bond yields, will influence the USD and provide the USD/JPY pair a boost. Aside from that, developments in the coronavirus drama, as well as broader market risk sentiment, may present trading possibilities./n
