While the yen surged to nearly 145 to the dollar on the back of a lack of response from the Bank of Japan (BoJ), the US dollar-Japanese yen (USD/JPY) currency pair remains in a downward trend.

The USD/JPY rose sharply from a previous low of 142.24 to 143.77 on December 19 following a BoJ Monetary Policy Meeting announcement that offered no guidance on yields control and retained the previous policy.

Japanese banker Haruhiko Kuroda – who served as the 31st governor of the BoJ from March 2013 to April 2023 – clarified remarks from the central bank’s current head Kazuo Ueda, with the yen rising further to 144.95 in the late evening of December 19.

The surge in the yen after the BoJ meeting, which offered no hint of policy change, came against the backdrop of the US dollar strengthening on expectations of Federal Reserve rate cuts next year.

However, the recent rally could be short-lived as long-term US bond yields have stabilised, while the Dow’s record-breaking nine-day climb may pause. 

The market is anticipating three interest rate cuts in 2024, with the likelihood in the US interest rate futures market of a rate decrease in March exceeding 70 per cent. 

The post-Federal Open Market Committee (FOMC) meeting decline has almost ended,while there is a cautious stance in regard to determining exit strategies for monetary easing policies.

Based on the spring wage negotiations and inflation trends since May, the current situation is expected to remain for the time being, while a significant decline in long-term US bond yields has slowed.

The Dow Jones had risen for nine days in a row, setting a new all-time high over five consecutive business days. 

And after falling below the low of 143.52 on December 20, the USD/JPY is expected to continue to drop, with the period of decline caused by a retracement from below 143 yen.

As long as it avoids falling below 143.52, the currency pair is expected to rise, and it may even surpass 144.50 should it test the high of 144.95 on the night of December 19.