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The Japanese Yen has drawn sellers in intraday trading around the 147.80 level, marking a new high since November 2022, achieved this Tuesday. Currently, the upward trend appears to have paused after three consecutive days of gains. Nevertheless, spot prices have remained above the Asian session low and are now trading around 147.55, down over 0.10% for the day.
Japan’s top currency diplomat, Masato Kanda, has issued a warning regarding the recent Yen (JPY) sell-off. He stated that authorities won’t rule out any options if speculation in the currency market continues. This, combined with market uncertainties, supports the JPY’s safe-haven status and puts downward pressure on the USD/JPY pair.
A private survey released on Tuesday indicates that growth in China's service sector activity slowed to an eight-month low, raising concerns over worsening economic conditions. Additionally, ongoing trade tensions between the U.S. and China dampen investor appetite for risk assets.
In recent developments, U.S. Commerce Secretary Gina Raimondo revealed that she doesn’t expect any changes in tariffs imposed by the U.S. on China under the Trump administration until the U.S. Treasury Department’s review is complete.
However, a significant corrective decline in the USD/JPY pair seems unlikely, given the substantial monetary policy divergence between the Bank of Japan (BoJ) and other central banks, including the Federal Reserve (Fed). Notably, the BoJ remains the only central bank with negative interest rates and is expected to continue its ultra-loose policy.
This outlook was reaffirmed by BoJ policymaker Hajime Takata on Wednesday, who stated that the central bank should remain patient with its accommodative policy given high uncertainty over the economic outlook. In contrast, the Fed is expected to keep interest rates higher for an extended period.
Additionally, the market still sees a potential 25 bps rate hike by the end of the year. This hawkish outlook continues to support U.S. Treasury yields, strengthening the USD and potentially limiting the downside for the USD/JPY pair.
Market participants are now awaiting the release of the U.S. ISM Non-Manufacturing PMI data, which will be published at the start of the North American trading session. This data, along with U.S. bond yields, will influence USD price action and impact the USD/JPY pair.
Traders will also monitor broader risk sentiment to identify short-term opportunities. However, the aforementioned fundamentals seem to favor buyers, suggesting that spot prices may likely continue to rise.
Disclaimer!
This analysis is based on fundamental and technical views from reliable sources, not as financial advice or an invitation to trade. This content aims to inform readers. Always conduct independent research before using other forex information as guidance in your trading.
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