Japanese Yen pulls back slightly after hitting fresh monthly high vs broadly weaker USD

The Japanese Yen (JPY) experienced a slight pullback on Thursday after reaching a fresh monthly high against the US Dollar (USD). The USD/JPY pair initially dropped below the mid-157.00s support level and hit a new monthly low during the early European session. However, it recovered slightly, trading above the 157.00 mark but still down over 0.60% for the day.

This decline was driven by signals from the US Federal Reserve (Fed) that there is no urgency to raise interest rates at their upcoming October 27-28 policy meeting and by a slide in US bond yields from multi-year highs, which narrowed the US-Japan rate differential. Additionally, more hawkish signals from the Bank of Japan (BoJ) supported the JPY, as BoJ Governor Kazuo Ueda indicated that underlying inflation is nearing the central bank's 2% target, strengthening expectations for an interest rate hike in December.

Traders are also closely monitoring the possibility of Japanese authorities intervening in the currency market if the pair breaches the 160.00 psychological mark.

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