The Japanese yen hovered around 159.2 per dollar on Wednesday after falling for two straight sessions, as investors assessed the Bank of Japan’s policy outlook ahead of next week’s meeting. Market reports indicate the central bank is likely to leave interest rates unchanged this month while it evaluates the economic impact of the conflict in the Middle East. However, it may also hint at a possible shift toward policy normalization as early as June.
The BOJ is expected to raise its inflation forecasts and cut its growth projections, reflecting the drag from higher energy prices and broader headwinds related to the war involving Iran. On the economic data front, Japanese exports increased for a seventh consecutive month, underpinned by solid demand from China and ASEAN economies.
The yen also came under additional pressure from a stronger US dollar after plans for a second round of US–Iran peace talks collapsed, even as President Donald Trump moved to extend the current ceasefire.