- The Japanese Yen finds support from dip-buying and stays near a multi-month high against the USD.
- Expectations of a BoJ rate hike and a shrinking US-Japan rate gap bolster the JPY.
- A strong risk appetite, trade tariff concerns, and recovering US bond yields may limit the Yen’s upside.
The Japanese Yen (JPY) rebounds from an intraday dip against a weakening US Dollar (USD), holding near its multi-month high. Expectations of further interest rate hikes by the Bank of Japan (BoJ) continue to support the JPY, driving Japanese government bond (JGB) yields higher and narrowing the rate gap between Japan and other economies. This shift strengthens demand for the lower-yielding Yen.
However, concerns persist over potential new tariffs on Japan by US President Donald Trump. Additionally, a rebound in US Treasury bond yields and a generally risk-on market sentiment may limit the JPY’s upside. Despite the ongoing USD selling pressure, traders remain cautious ahead of Friday’s US Nonfarm Payrolls (NFP) report, which could influence the USD/JPY pair’s next move.
Japanese Yen Supported by BoJ Rate Hike Bets, Rising JGB Yields
- US President Donald Trump accused Japan and China of deliberately devaluing their currencies and hinted at potential new tariffs on imports if the trend continues.
- The White House announced a one-month delay in implementing tariff compliance under the US-Mexico-Canada Agreement for US automakers, easing trade war fears and improving risk sentiment.
- The improved risk appetite weakens demand for the safe-haven Japanese Yen (JPY) during the Asian session.
- Investors continue to anticipate further rate hikes from the Bank of Japan (BoJ), pushing the 10-year Japanese government bond (JGB) yield to its highest level since June 2009.
- BoJ Deputy Governor Shinichi Uchida reaffirmed that the central bank would adjust its policy further if economic and inflation forecasts align with expectations.
- US Treasury bond yields have declined for six straight weeks amid concerns that Trump’s trade policies could slow long-term economic growth.
- US private sector employment rose by just 77K in February, missing the 140K forecast, as reported by Automatic Data Processing (ADP).
- US consumer confidence has fallen to a 15-month low, reinforcing speculation that the Federal Reserve may resume interest rate cuts by June.
- Despite stronger-than-expected US service sector data, the US Dollar (USD) remains under pressure, with the DXY index extending its weekly downtrend to a four-month low.
- Traders now await the US Weekly Initial Jobless Claims report for short-term direction, while the key focus remains on Friday’s Nonfarm Payrolls (NFP) report.
USD/JPY Poised to Retest Multi-Month Low Near 148.00
From a technical standpoint, USD/JPY has been trading within a familiar range over the past two weeks, consolidating after a sharp drop from the 159.00 year-to-date high in January. This pattern suggests a bearish consolidation phase, with daily chart oscillators holding deep in negative territory but not yet in oversold conditions. As a result, the path of least resistance remains to the downside, increasing the likelihood of further declines.
A break below the 148.40 intermediate support could pave the way for a retest of the 148.00 multi-month low seen on Tuesday. Further selling pressure could accelerate losses toward 147.35, with an eventual test of the key 147.00 psychological level.
On the upside, immediate resistance is seen at 149.45-149.50, followed by 149.75 and the key 150.00 psychological barrier. A decisive move above 150.00 could trigger a short-covering rally, pushing USD/JPY towards the next resistance zone at 150.55-150.60. However, any further gains may attract fresh selling interest near 151.00, with strong resistance likely around the weekly high of 151.30.
