The USD/JPY pair fell to approximately 161.50 during early European trading on Friday as the Japanese Yen (JPY) rose against the US Dollar (USD) following reports of Japan’s initiative to prompt pension funds to increase holdings of domestic financial assets.
Japan’s Finance Minister Satsuki Katayama announced government measures aimed at encouraging the Government Pension Investment Fund (GPIF) to significantly elevate investments in Japanese financial assets, as reported by Reuters. Analysts suggested this strategy could provide stronger support for the currency compared to direct market intervention.
Traders reduced expectations of a US Federal Reserve (Fed) rate hike this year, lessening pressure on the Greenback against the JPY. New York Fed President John Williams stated on Thursday that despite renewed Middle East conflicts, he did not anticipate sustained energy price increases for the remainder of the year.
Market expectations for a 25-basis-point rate hike at the July meeting fell to 24.6% from 31% in the prior session, though up from 18.2% a week earlier, per the CME FedWatch tool. For the September policy meeting, a 62.3% probability of a hike was priced in, down from 66.6% on Wednesday but an increase from 54.1% previously.
