- USD/JPY drew offers on bearish Japanese retail trade.
- The DXY faced broader weakness amid positive market sentiment.
- The BOJ’s unlimited bond buying program could boost the asset.
USD/JPY climbed sharply above 123.00 as Japanese retail trade slowed. Japan’s Ministry of Economy, Trade and Industry released an annual retail report of -0.8% higher than the previous figure of -1.1%, but extremely lower than the estimate of the -0.3% market.
The greenback has underperformed against the Japanese yen over the past two trading sessions despite the Bank of Japan’s (BOJ) ongoing benchmark 10-year Japanese government bond (JGB) purchase program. ). Usually, central banks’ bond-buying program signals their intention to keep interest rates from rising. The BOJ intends to restrict its rise betting interest rates. The BOJ’s four-day bond buying program will continue until Thursday.
Meanwhile, the BOJ announced an emergency bond purchase operation and offered to buy 150 billion yen in JGB 10-25 years and 100 billion yen in JGB with a maturity over 25 years.
On Tuesday, market participants applauded Japan’s slightly higher unemployment rate. The Japan Bureau of Statistics reported an unemployment rate of 2.7%, higher than estimates and the previous print of 2.8%.
The US Dollar Index (DXY) has lost appeal amid positive signals from the Russian-Ukrainian peace talks. News of a Russian rebel cut in Ukraine brightened market sentiment. The risk impulse is gaining momentum and, ultimately, risk-sensitive assets.
Going forward, the US Nonfarm Payrolls (NFP) will be the major event this week. But before that, investors will focus on the employment change and annualized gross domestic product (GDP) in US ADP, which are due out on Wednesday.