USD/JPY touches new multi-month high above 158.50
- USD/JPY climbed to its highest level since July above 158.50 on Wednesday.
- The US Dollar benefits from the souring risk mood after Trump tariff news.
- ADP Employment Change data and FOMC Minutes coming up next.
USD/JPY continued to stretch higher and touched its strongest level since July above 158.50 on Wednesday. At the time of press, the pair was trading at 158.48, rising 0.27% on a daily basis.
Rising US Treasury bond yields support USD
US President-elect Donald Trump is considering declaring a national economic emergency to allow for a new tariff program, CNN reported on Wednesday, citing four sources familiar with the matter. With the immediate reaction, the benchmark 10-year US Treasury bond yield rose above 4.7%, boosting the US Dollar (USD).
In the early American session, the Automatic Data Processing (ADP) will release the private sector employment data for December, which is forecast to show an increase of 140,000 after November's print of 146,000.
Later in the day, the Federal Reserve will publish the minutes of the December policy meeting. Investors will scrutinize the details surrounding the discussions on the policy outlook for 2025 after the revised Summary of Economic Projections showed a majority of policymakers were forecasting two 25 basis points rate cuts this year.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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