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Forex pairs in this Article » USD/JPY (London) - USD/JPY has regained broad bullish momentum, with monetary policy expectations returning as the main driver for the pair.

NFP tapering concerns abate

USD/JPY fell to JPY102.85 on Tuesday on bearish momentum carried through from weaker-than-expected US non-farm payrolls. NFPs increased by just 74k versus a consensus expectation of 193k raising questions over the schedule of the Federal Reserve’s tapering of its monthly asset purchase programme. The Fed moved to cut by USD10bn last month, leaving purchases at USD75bn. While there had been concerns that the weak jobs numbers would delay further tapering, the robust US macro data in the interim has helped to reignite USD bullishness.

The main driver of the USD/JPY pair has been diverging monetary policy expectations across the two banks. While the Fed is on a schedule of tapering the size of its asset purchases, the Bank of Japan remains committed to aggressive bond purchases as it fights off deflationary pressure. Japanese bond purchases currently stand at JPY7 trillion a month, but BoJ officials have said that they are prepared to increase purchases as they target 2.0 percent inflation.

USD/JPY is currently trading at JPY104.7150 in a period of consolidation after a session high of JPY104.9170.
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