USD/JPY strengthens amid expectations of BoJ policy tightening | 16 January 2025
16 January 2025, USD/JPY
Event to pay attention to today:
15:30 EET. USD - Unemployment Claims
USDJPY:
The Japanese Yen (JPY) attracted buyers for the second consecutive day on Thursday amid comments from Bank of Japan Governor Kazuo Ueda signalling a possible rate hike next week. In addition, signs of intensifying inflationary pressures in Japan are supporting the prospects of further BOJ policy tightening, sending Japanese government bond (JGBs) yields to multi-year highs. In contrast, US Treasury yields fell sharply on Wednesday in response to favourable US inflation data. The narrowing yield differential between the US and Japan is seen as another factor undermining the yen.
Meanwhile, lower-than-expected US inflation has raised the possibility that the Federal Reserve may cut interest rates twice this year. This makes the US Dollar (USD) bulls defensive and drives the USD/JPY pair to a new four-week low around 155.20 during the Asian session on Thursday. Nevertheless, the risk-on sentiment may keep traders from placing new bullish bets on the safe-haven Yen and provide some support to the currency pair. Investors are currently turning their attention to the US economic plan, which will see the release of monthly retail sales data and weekly initial jobless claims data, in search of short-term opportunities.
Trade recommendation: Trading mainly with Sell orders from the current price level.
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