Japanese Yen outperforms as BoJ’s policy takes centre stage

The Japanese Yen experienced a surge against its major currency peers on Thursday, with the USD/JPY pair falling 0.35% to approximately 155.75 prior to the Bank of Japan's monetary policy announcement on Friday. The Japanese Yen proved to be the strongest against the US Dollar. Market experts anticipate the Bank of Japan will increase interest rates by 25 basis points to 1.25%, with central bank communication being a pivotal factor for the Yen's next move.

DBS Group Research economist Eugene Leow suggests the market has largely predicted the BoJ's hike, now focusing on the tone of its communication. Investors will closely monitor the August National Consumer Price Index (CPI) data before the policy announcement. On the US Dollar front, traders are optimistic about the Federal Reserve's potential interest rate hike this year, with the Fed raising rates by 25 basis points to 3.75%-4.00% on Wednesday and signaling more hikes are likely.

The USD/JPY pair currently trades at 155.63, holding below the 20-day Exponential Moving Average (156.44), indicating a bearish short-term bias. The RSI around 43 suggests stabilization, but modest downside pressure remains.