FxWirePro: What drives USD/JPY to 11-month lows? Is further Yen's appreciation adding pressure on BoJ?

USD/JPY collapsed so notably since February, almost 9.03% to current flashes of 110.510. The dollar slumped to its least level in last 17 months against the a deemed Asian safe haven Yen, signalling the bets on speculation over an intrusion by BoJ to arrest the further appreciation of Yen.

However, let's shed some light on as to why has the pair dropped so much, here are the fundamental macroeconomic factors that drive dollar's weakness against yen:

Dovish FOMC: USD/JPY selling momentum began intensifying after last Friday's strong U.S. jobs report was not suffice to modify the stances that the Federal Reserve will stick to a cautious approach on rate hikes.

Despite the steady pace of jobs growth few investors expect the Fed to hike rates more quickly after recent dovish comments by Chair Janet Yellen.

Investors shifted their attention on last week's Fed's minutes in March meeting for fresh indications on the future path of interest rates. But, it delivered dovish tone as the lower interest rates make the dollar less attractive to yield seeking investors.

Asset cues weakened: On the flip side, Yen, which investors tend to buy in times of market turmoil in as it was perceived as safe haven in EM Asian baskets, was boosted as oil prices began dropping again from $41 levels, and hitting one-month lows and global equities weakened.

The yen's gains fuelled speculation over how much higher the currency can climb before Japanese officials act to weaken the currency.

BoJ's easing cycle: The central bank of Japan surprised markets with its decision to maintain the negative interest rates earlier this year but the yen has continued to strengthen, posing a challenge to the central bank's attempts to spur price growth.

Shortly, in the US, the ISM non-manufacturing index for March is forecast to post its first rise for four months. That level would historically be consistent with ‘above trend’ growth in the overall economy.

Technically, USD/JPY's break-out below major supports at 111 levels (lower BB, Avrg. of recent lows) signals more scope for downside to targets upto 109.698 or 108.029 levels. RSI and Stochastic oscillators on both daily and weekly graphs are indicative of further declines. 

USD/JPY hit lows of 110.30, the weakest level since October 31, 2014 and was last at 110.510. The pair has shown slumps of more than 9.18% thus far in this year. While, EUR/JPY poses at 2-weeks lows.