USD/JPY Holds Below 145.00 After BoJ Minutes

• USD/JPY is losing traction around 144.60 in the first Asian session on Thursday, down 0.10% on the day.
• Dovish Fed and rising jumbo rate cut bets weigh on USD.
• Board members are calling for a gradual and timely rate hike, the BoJ minutes said.

USD/JPY drops to near 144.60 during the early Asian session on Thursday. The weakening of the US dollar (USD) amid growing bets on a jumbo interest rate cut from the US Federal Reserve (Fed) in November continues to weigh on the pair. Investors await economic data and signals on future rate cuts from Fed officials.

Data released by the Commerce Department showed on Wednesday that US new home sales fell 4.7% on Monday to 716,000 in August from a revised 751,000 in July, above market consensus. Earlier this week, a weaker-than-expected report on US consumer sentiment raised concerns about the health of the labor market, prompting expectations of deeper rate cuts from the Fed.

Traders have priced in a nearly 57.4% chance of a 50 basis point (bps) cut by the Fed at its November meeting, while the chance of a 25 basis point cut is 42.6 %, according to the CME FedWatch Tool. Fed Chairman Jerome Powell’s speech will be in focus on Thursday. Also, final annualized US gross domestic product (GDP) for the second quarter (Q2) is due later in the day, and the figure is expected to rise 3.0%. Any hint of further jumbo rate cuts by the Fed or signs of weakness in the US economy could send the greenback lower in the near term.

Meanwhile, the Bank of Japan (BoJ) publishes the minutes of its July policy meeting on Thursday. BoJ members called for a gradual and timely rate hike. Many members said it was appropriate to raise interest rates to 0.25% by adjusting the degree of monetary support and few members said it was appropriate to adjust the degree of monetary support moderately.

Finance Minister Shunichi Suzuki said on Tuesday that the central bank would take appropriate monetary policy measures while continuing to cooperate closely with the government. The potential for the BoJ to delay raising interest rates could undermine the JPY and limit USD/JPY’s downside.