- The Japanese Yen attracts safe refuge flows amid commercial uncertainties and growing geopolitical tensions.
- Divergent policy expectations between the BOJ and the Fed undermine the USD/JPY pair in the middle of a weaker USD.
- The operators now expect the publication of the US PPI to obtain a short -term impulse later this Thursday.
The Japanese Yen (JPY) is strengthened for the second consecutive day against a US dollar (USD) in general weaker and moves even more than a minimum of two weeks reached the previous day. The initial market reaction to the news of high -risk commercial conversations between the US and China fades quickly after the new tariff threat of US President Donald Trump. This, together with the increase in geopolitical tensions, moderates the appetite of investors by higher risk assets and supports the JPY’s safe refuge status.
Apart from this, the expectations that the Bank of Japan (BOJ) could press for more strict monetary conditions in the midst of expanding inflation signals in Japan provide additional support to the JPY. The USD, on the other hand, seems vulnerable near the monthly minimum, since the inflation figures to the consumer in the USA of Wednesday reaffirmed the bets that the Federal Reserve (Fed) would resume its cycle of rate cuts in September. This, in turn, drags to the USD/JPy’s torne below the 144.00 mark in the last hour.
The Japanese Yen is backed by a combination of factors; seems prepared to appreciate even more
- The president of the USA, Donald Trump, told reporters on Wednesday that he will establish unilateral tariffs and send letters to commercial partners next week or two, saying “this is the agreement, you can accept or reject it.” Previously, US Treasury Secretary Scott Besent told Congress that it is very likely that pause in tariffs will spread to countries that are negotiating in good faith.
- The comments add a layer of uncertainty amid the rapid changing posture of Trump about commercial policies, eclipssing optimism on the agreement between the US and China on a plan to relieve export controls and commercial tensions. Meanwhile, the Wall Street Journal reported that China is imposing a six -month limit on rare earth export licenses for US manufacturers and motorists.
- In response, American negotiators have agreed to relieve some export restrictions on articles such as aircraft engines, related and ethane components, used in the manufacture of plastics. The temporal agreement reflects a fragile truce between the two largest economies in the world, since both parties keep the options for climbing if the tensions increase again and take advantage of it in future negotiations.
- A Reuters survey indicated that a slight majority of economists expects the Bank of Japan not to make another increase in interest rates this year. However, investors seem convinced that the BOJ will proceed with the monetary tightening, marking a significant divergence with the growing market bets that the Federal Reserve (Fed) will resume its cycle of warehouse cuts later this year.
- The US Labor Statistics Office (BLS) on Wednesday that the general consumer price index (CPI) increased from 2.3% in the month prior to 2.4% in annualized rhythm in May, below consensus estimates of 2.5%. Meanwhile, the underlying indicator, which excludes volatile food and energy prices, rose 2.8% during the month reported, matching the April increase.
- The operators reacted quickly and are now valuing a probability of almost 70% that the Federal Reserve cut their interest rate at 25 basic points (PBS) in September, compared to 57% before the data. This leads to a new fall in the yields of the US Treasury bonds and drags the US dollar back to the monthly minimum, which, in turn, exerts pressure on the USD/JPY torque.
- In the geopolitical front, Israel could supposedly launch an attack on Iran’s nuclear sites. To prepare for this possibility, the US Department of State authorized some employees to leave Iraq, while the Pentagon allows military families to voluntarily abandon US bases throughout the region. This happens while Trump expressed doubts about reaching a nuclear agreement with Iran.
- The USD/JPY pair fell to a new weekly minimum during Thursday’s Asian session, although it managed to bounce some pips in the last hour and currently quotes around the 144.00 brand, even lowering more than 0.35% in the day. The operators now expect the publication of the US Production Price Index (PPI), which could generate short -term opportunities.
The USD/JPY could accelerate the fall once the minimum of the Asian session is broken, around 143.70
From a technical perspective, the setback after a maximum of two weeks and the subsequent fall below the horizontal support of 144,55-144.50 favor the bassists of the USD/JPY. In addition, slightly negative oscillators in schedules/day suggest that the lower resistance path for cash prices is down. Some continuation sales below the minimum of the Asian session, around the 143.70 zone, will reaffirm the bearish perspective and will pave the way for a fall to the round figure of 143.00 en route to the horizontal support of 142.62-142.60.
On the other hand, the 144.55 area, or the peak of the Asian session, now seems to act as an immediate obstacle, above which a new round of coverage of shorts could allow the USD/JPY to make a new attempt towards conquering the psychological brand of 145.00. However, the bulls could expect a subsequent strength beyond the region of 145.45, or a maximum of two weeks reached Wednesday, before positioning themselves for additional profits. Cash prices could then accelerate the positive impulse towards the round figure of 146.00.
And in Japanese faqs
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
