- The Japanese Yen negotiates with a slight positive bias in the midst of the recovery of the demand for safe refuge.
- Reduced bets for an increase in BOJ rates in 2025 and trade uncertainties limit JPY’s profits.
- The USD rises to its highest level in more than a week and lends some support to the USD/JPy torque.
The Japanese Yen (JPY) advances slightly in front of his American counterpart after the good bidirectional price movements of the previous day in the middle of the global escape towards security. In the context of the uncertainty about the commercial policies of US President Donald Trump and the increase in geopolitical tensions in the Middle East, the Federal Reserve Line Line Pause (FED) on Wednesday moderates the appetite of investors by higher risk assets. This helps revive the demand for traditional assets of safe refuge and, in turn, supports the JPY.
Meanwhile, the cautious approach of the Bank of Japan (BOJ) to undo its monetary stimulus of a decade has forced investors to delay their expectations about the probable moment of the next increase in interest rates to the first quarter of 2026. Apart from this, concerns about the possible economic repercussions of US tariffs of 25% over Japanese vehicles Imports could limit the JPY. This, together with the recent rebound of the US dollar (USD) from a minimum of three years, supports the USD/JPy torque.
The Japanese Yen attracts some safe refuge flows in the middle of the growing tensions in the Middle East
- The Federal Reserve, as expected, maintained stable interest rates at the end of a two -day policy meeting on Wednesday in the midst of expectations of greater inflation in the future. In the “Dot Plot” very observed, the committee indicated that two cuts by the end of 2025 are still on the table.
- However, Fed officials predicted a single cut of a quarter percentage point in each of 2026 and 2027. In addition, seven of the 19 responsible for the policy indicated that they did not want cuts this year, compared to four in March, in the midst of the risk that inflation could be kept persistently high and close the year by 3%.
- This adds to the comments of US President Donald Trump earlier this week, which indicated that tariffs in the pharmaceutical sector will arrive soon, and weigh on the feeling of investors. This, together with the geopolitical risks derived from the Israel-Iran conflict, benefits the status of safe refuge of the Japanese yen.
- As Israel-Iran conflict enters its seventh day, reports suggest that US officials are preparing for a possible attack on Iran this weekend. According to the Wall Street Journal, Trump approved attack plans against Iran, but is waiting to see if Tehran will leave his nuclear program.
- Meanwhile, Iran’s supreme leader, Ayatollah Ali Khamenei, said in a national speech that Iran will not give up and warned that any US military intervention would result in irreparable damage. This, in turn, increases the risk of a broader regional conflict in the Middle East.
- In the commercial front, Japanese Prime Minister Shigeru Ihiba said this week that we have not yet reached an agreement, since there are still some differences between the two parties. This comes before the deadline of July 9 for higher reciprocal tariffs of the US and could limit the JPY.
- The US dollar, on the other hand, is close to its highest level in more than a week thanks to the Fed hard line pause. This is considered to offer some support to the USD/JPY torque and justify the caution for the bearish operators in the absence of relevant economic data of the USA on Thursday.
The USD/JPY bulls await a break through the obstacle of 145.45 before opening new positions
From a technical perspective, any additional sliding will probably find a decent support and could still be seen as a purchase opportunity near the 144.50-144.45 area, below which the USD/JPY torque could slide to the level of 144.00. A convincing break below the latter would expose the following relevant support near the region of 143.55-143.50 before cash prices eventually fall at the round level of 143.00 on the way to the minimum of last week, around the region of 142.80-142.75.
On the contrary, the 145.45 zone, which represents the upper end of a short -term and monthly maximum range, could continue to act as an immediate obstacle. A sustained strength beyond this level will be seen as a new trigger for upward operators. Since the oscillators in the daily chart have begun to gain positive traction, cash prices could then aim to conquer the round level of 146.00 before climbing more to the region of 146.25-146.30, or the peak of May 29.
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.
