USD/JPY weakens near 143.50, focus on Fed’s Bowman speech

• USD/JPY is losing ground around 143.55 in the first Asian session on Tuesday.
• Fed rate cut keeps bearish mood around USD/JPY.
• BoJ policymakers tempered another hike speculation, which could limit JPY’s upside; Rising geopolitical risks could boost JPY.

USD/JPY is trading with slight losses near 143.55 during the early Asian session on Tuesday. The decline in the US dollar (USD) continues to weigh on the pair. September’s US consumer confidence is due later in the day and Federal Reserve (Fed) Governor Michelle Bowman is due to speak.

The Fed’s interest rate cut last week was widely expected, although the decision to cut by 50 basis points (bps) was somewhat of a surprise. Minneapolis Fed President Neel Kashkari said Monday that he believes there should and will be further interest rate cuts in 2024. However, Kashkari expects future cuts to be smaller than those at the September meeting.

Chicago Fed President Austan Goolsbee noted, “A lot more rate cuts are probably needed over the next year, rates have to come down significantly.” Additionally, Atlanta Fed President Raphael Bostic said on Monday that the US economy is close to normal rates of inflation and unemployment, and the central bank also needs monetary policy to “normalise”. The greenback remains under pressure amid growing expectations that the Fed will cut further interest rates in the rest of 2024.

However, speculation that the Bank of Japan (BoJ) is in no rush to raise interest rates could limit the upside for the Japanese yen (JPY). The BoJ left interest rates unchanged last week as policymakers need time to assess when to raise borrowing costs further. “Most market players expected the next rate hike to take place in December, but Mr. Ueda’s remarks led some of them to think that it may be delayed until early next year,” said Tomoichiro Kubota , senior market analyst at Matsui. Securities Co.

Meanwhile, rising geopolitical tensions in the Middle East could boost refuge flows, benefiting the JPY. Bloomberg reported early Tuesday that Israel had carried out airstrikes on targets in southern Lebanon, killing nearly 500 people in one of the bloodiest days of fighting in nearly two decades and fueling fears of an all-out conflict.