Japanese yen under pressure, BoJ trims bond purchases

The Japanese yen has edged lower on Monday. USD/JPY is up 0.26% on the day and is trading at 156.17 at the time of writing. The yen is coming off a rough week, in which it fell 1.8% against the US dollar.
BoJ cuts Japanese government bonds purchases

The Bank of Japan started the week with a hawkish signal to the markets. The central bank reduced the amount of government bonds it offered to buy, but the move was muted and had little effect on yields of 10-year Japanese government bonds (JGBs). The reduction in government bond purchases follows the BoJ’s Summary of Opinions from its April meeting, which showed a hawkish shift among board members, with some urging the BoJ to continue raising interest rates.

With the yen trading at low levels, the markets are on the watch for Tokyo to take steps to boost the currency. The most dramatic move would be another currency intervention. The Ministry of Finance is suspected to have intervened in late April after the yen fell below the 160 line, its lowest level in 34 years. The reduction in JGB purchases may have been an attempt by the BoJ to boost the yen and a signal that the BoJ won’t sit idly by as the yen slides.

In the US, the University of Michigan consumer confidence index fell to 67.4 in May, compared to 77.2 in April and shy of the market estimate of 76.2. One-year inflation expectations rose from 3.2% to 3.5%, which indicates that consumers are less confident about inflation declining.

USD/JPY Technical

• USD/JPY is testing resistance at 156.02. Above, there is resistance at 156.29
• There is support at 155.65 and 155.38

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