USD/JPY rises above 157.00 amid holiday in Japan | 02 Enero 2025

USDJPY:

The USD/JPY exchange rate rose to 157.30 in the early hours of Asian trading on Thursday.Expectations that US interest rates will remain elevated for a long time are boosting the US Dollar (USD) against the Japanese Yen (JPY).Markets in Japan are closed for the rest of the week.On Friday, we will be keeping a close eye on the S&P Global US Manufacturing Activity Index for December.

Traders are currently digesting the Federal Reserve's (Fed) decision to cut rates by a quarter point at its December meeting, which was characterised by a hawkish sentiment. Analysts are anticipating that some of Trump's policy proposals, including tariffs, could potentially lead to higher inflation. However, Fed Chairman Jerome Powell has stated that it is too early to predict this, emphasising that the central bank will proceed with caution regarding further rate cuts.The significant difference in interest rates between the US and Japan is likely to provide a favourable tailwind for the pair in the near term.

Bank of Japan (BOJ) Governor Kazuo Ueda stated last week that the central bank anticipates the Japanese economy will move closer to achieving its 2% inflation target sustainably this year.The BOJ is scheduled to release its quarterly report on the regional economy next week, which is likely to include an assessment of wage increases across the country. This report may provide insights into the BOJ's subsequent policy decision on 24 January.

Meanwhile, verbal intervention by Japanese authorities may help limit the JPY's losses, with Japanese Finance Minister Katsunobu Kato noting on Friday that the official will take appropriate measures against excessive currency fluctuations.

Trade recommendation: We follow the level of 157.00, if it is fixed above we consider Buy positions, if it bounces back we consider Sell positions.

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