Search ForexCrunch
  • USD/JPY regains some poise as S&P 500 futures rise 1%. 
  • The BOJ is likely to downgrade inflation forecasts. 
  • The central bank is unlikely to take provide immediate stimulus. 

USD/JPY has bounced up from five-week lows seen Wednesday alongside an uptick in the US stock futures.

The pair is currently trading near 104.39, representing marginal gains on the day, having printed a low of 104.11 during Wednesday’s European trading hours. That was the lowest level since Sept. 21. 

The global stock markets fell sharply on Wednesday as a rising number of coronavirus cases across Europe and the US threatened to derail the global economic recovery. The risk-off mood strengthened the demand for anti-risk currencies like the Japanese yen. As such, the pair dropped to multi-week lows in Europe but trimmed losses while heading into the NY close, as the dollar also drew haven bids. 

Currently, the futures tied to the S&P 500 are signaling risk reset with 1% gains. Hence, the FX markets’ anti-risk action has stalled, allowing for a bounce in USD/JPY. 

BOJ to maintain status quo

The Bank of Japan is expected to keep interest rates, and other policy tool s unchanged on Thursday but downgrade inflation and growth forecasts. 

However, that may not translate into aggressive yen selling as the BOJ is unlikely to take immediate action in response to weak inflation. The central bank is already running an ultra-easy monetary policy for more than seven years and looks to have run out of ammo. 

Hence, the focus remains on the broader market sentiment. 

Technical levels