USD/JPY moves lower to near 149.80, focus on US PCE data

• USD/JPY loses ground on risk appetite ahead of US PCE data.
• JPY received upward support on hawkish remarks from BoJ’s Hajime Takata.
• The US Dollar experiences a decline despite the improvement in US Treasury yields.

USD/JPY tumbles to around 149.80 during the European session after Bank of Japan (BoJ) board member Hajime Takata's hawkish remarks on Thursday. Takata stressed the importance of the BoJ considering adaptable measures, including the potential exit from monetary stimulus.

However, Hajime Takata provided additional comments, stating a reluctance to pinpoint any specific policy action when mentioning 'nimble responses.' He clarified that there are no plans for consecutive interest rate hikes and emphasized the necessity for gradual steps given the mixed circumstances surrounding small firms. Various options are available when dismantling the yield curve control framework.

The US Dollar Index (DXY) depreciates on Thursday, maintaining its position around 103.80, while the 2-year and 10-year yields on US Treasury coupons stand at 4.65% and 4.28%, respectively, by the press time. The weakness in the USD/JPY pair may be attributed to an improved risk appetite ahead of the release of key US Personal Consumption Expenditures - Price Index data, which could potentially influence the Federal Reserve's monetary policy stance.

According to the CME FedWatch Tool, the likelihood of rate cuts in March stands at 3.0%, with probabilities of 19.3% and 52.6% in May and June, respectively. New York Federal Reserve (Fed) President John Williams stated on Wednesday that while there is still progress to be made in reaching the Fed's 2% inflation target, the possibility of interest rate cuts this year remains on the table, contingent upon incoming data.