- USD/JPY may face resistance as expectations for further Bank of Japan rate hikes grow.
- Traders anticipate key Japanese economic reports on Friday, including industrial production, retail sales, and Tokyo inflation.
- The US Dollar strengthens, supported by rising US Treasury yields.
USD/JPY recovers from recent losses, trading around 149.40 during Wednesday’s European session. However, upside potential may be limited as the Japanese Yen (JPY) finds support amid rising expectations of further Bank of Japan (BoJ) rate hikes.
The BoJ is anticipated to raise rates from 0.50% to 0.75% this year. Bloomberg reports that overnight index swaps fully price in a rate hike by September, with a 50% chance of an earlier move as soon as June.
Meanwhile, Japanese traders await key economic reports on Friday, including industrial production, retail sales, and Tokyo inflation, which could provide insights into the BoJ’s monetary policy direction.
The US Dollar (USD) gains strength as US Treasury yields rise, with the US Dollar Index (DXY) approaching 106.50. At the time of writing, 2-year and 10-year US Treasury yields stand at 4.11% and 4.32%, respectively.
In other developments, US President Donald Trump has launched an investigation into potential tariffs on copper imports to boost domestic production. He also confirmed that tariffs on Canada and Mexico will take effect after the current one-month delay ends next week.
On Tuesday, Richmond Fed President Thomas Barkin projected another decline in Personal Consumption Expenditure (PCE) inflation this week, highlighting the Fed’s progress in managing inflation. While maintaining a positive outlook, he stressed a cautious “wait and see” approach amid ongoing policy uncertainties.
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