USD/JPY eyes 115.30 on Powell’s repeat backing of a 25 bps interest rate hike March

• USD/JPY hopes more offers from investors amid rising bets over a 25 bps interest rate hike.
• The DXY has slipped near 97.73 despite the outperformance of US Initial Jobless Claims.
• Inflation will stay longer on supply chain bottlenecks and rising oil prices amid the Ukraine crisis.

The USD/JPY pair looks to settle near 115.30 amid a dovish tone by the Federal Reserve (Fed) chair Jerome Powell in his 2.0 speech on his semi-annual testimony before the US Congress. It is worth noting that the market participants were betting on a 50 basis point (bps) interest rate hike earlier. At a point in time, investors had started discounting half of the percent rate hike, as it required to curb the soaring inflation. Therefore, backing of a 25 bps rate hike in Powell’s testimony again on the second day of his semi-annual testimony is more a dovish tone for the market.

It is highly likely that the implications of the Russia-Ukraine crisis such as supply chain bottlenecks, rising oil prices, and expensive energy will collaborate and bring a fresh wave in inflation. So inflation is here to stay for a longer period and Fed is prepared to raise interest rates by more than that in a meeting or meetings if inflation doesn't come down, said Powell in his semi-annual testimony.

However, the Fed will increase rates further but for now, bets on 50 bps rate hike have been trimmed dramatically and a quarter percent of a rate hike is on the cards. This has underpinned the Japanese yen against the mighty greenback.

Meanwhile, the US dollar index has slipped near 97.73 despite the outperformance of US Initial Jobless Claims. The latter has landed at 215k on Thursday lower than the market consensus of 225k and the previous figure of 233k.