20 December 2024, USD/JPY
USDJPY:
The Fed's decisiveness continues to drive US bond yields higher and undermine the yen.
A stronger-than-expected Japanese consumer price index leaves room for a BoJ rate hike in 2025.
The Japanese yen (JPY) continues its two-week downtrend and hits a five-month low against its U.S. counterpart during the Asian session on Friday. On Thursday, the Bank of Japan (BoJ) almost unanimously kept rates unchanged and outlined a cautious outlook for 2025 amid sluggish economic growth, which in turn is weighing on the Japanese yen. In addition, the widening gap between US and Japanese bond yields is contributing to an outflow of funds from the lower-yielding yen.
Meanwhile, the Federal Reserve's (Fed) announcement that it will slow the pace of rate cuts in 2025 is helping the US Dollar (USD) maintain its strong weekly rise to a two-year high. This is further fueling the USD/JPY pair's strong rally towards 158.00. However, data that Japan's Consumer Price Index (CPI) rose slightly more than expected in November, which could prompt the Bank of Japan to raise interest rates in early 2025, gives some respite to JPY bulls.
Trade recommendation: Trading mainly with Buy orders from the current price level.
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