USD/JPY rallies to near 144.00 as BoJ delivers diplomatic policy guidance

• USD/JPY surges above 144.00 as BoJ refrains from committing pre-defined rate hikes in this year.
• Japan's National CPI rose to 3% in August.
• Traders see the Fed cutting interest rates further by 75 bps to 4.00%-4.25%.

The USD/JPY delivers a sharp rally to near 144.00 in Friday's European session. The asset strengthens as the Japanese Yen (JPY) weakens after the Bank of Japan's (BoJ) monetary policy announcement. The BoJ kept interest rates in the range of 0.15%-0.25%, as expected, but did not endorse the need of more hikes in the remaining year, which was widely anticipated by market participants.

BoJ Governor Kazuo Ueda said, "Our decision on monetary policy will depend on economic, price and financial developments at the time. Japan's real interest rates remain extremely low. If our economic and price forecasts are achieved, we will raise interest rates and adjust the degree of monetary support accordingly," at the press conference.

Going forward, market speculation for more BoJ rate hikes is expected to remain firm as the Japan's National Consumer Price Index (CPI) data for August came in higher at 3% than 2.8% in July. The National CPI data excluding fresh food grew expectedly by 2.8%, faster than the prior release of 2.7%.

Meanwhile, a mild recovery in the US Dollar (USD) has also pushed the asset higher. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, bounces back to near 100.85 from the intraday low of 100.40.

The near-term outlook of the US Dollar is expected to remain uncertain as traders expect the Federal Reserve (Fed) to continue with an aggressive policy-easing cycle. The CME FedWatch tool shows that the central bank will reduce interest rates further by 75 basis points (bps) in the remaining two policy meetings this year.

The Fed delivered its first interest rate cut decision in more than four years on Wednesday in which it cut its key borrowing rates by 50 bps to 4.75%-5.00%.