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Japanese Yen extends losing streak on hawkish Fed bets, intervention risk limits downside

  • USD/JPY advances for a fifth consecutive day and hits a two-week high on Friday.
  • Strong US data and rising Treasury yields reinforce expectations of a more hawkish Fed.
  • Fears of intervention by Japanese authorities continue to limit the pair’s upside potential.

USD/JPY trades around 158.55 on Friday at the time of writing, up 0.11% on the day, as the pair extends its bullish momentum for a fifth straight day. The rebound in the US Dollar (USD), supported by higher US yields and expectations of tighter monetary policy from the Federal Reserve (Fed), continues to weigh on the Japanese Yen (JPY).

Investors increased their bets on a possible Fed rate hike this year following the release of stronger-than-expected US inflation data earlier this week. United States (US) Consumer Price Index (CPI) inflation accelerated to 3.8% YoY in April from 3.3% previously, while the Producer Price Index (PPI) surged 6% on a yearly basis. At the same time, Retail Sales rose 0.5% MoM, confirming the resilience of US consumer spending.

This combination of solid data pushed US Treasury yields higher, with the benchmark 10-year yield reaching its highest level in nearly a year. Deutsche Bank noted that short-term yields also moved higher, with the two-year Treasury yield climbing back above 4%, further supporting the Greenback.

According to the CME FedWatch tool, markets are now pricing nearly a 40% chance of at least one rate hike before year-end, compared with less than 15% a week earlier. This shift continues to support demand for the US Dollar and underpins USD/JPY.

The geopolitical backdrop is also helping the US currency. Persistent tensions in the Middle East, particularly surrounding negotiations between the United States and Iran and risks linked to the Strait of Hormuz, continue to fuel market caution. Meanwhile, the meeting between US President Donald Trump and Chinese President Xi Jinping was perceived as constructive by investors, easing some concerns over trade tensions.

In Japan, the latest data showed that the Producer Price Index rose 4.9% YoY in April, driven by higher energy and import costs. Rising Oil prices continue to weigh on Japan’s economic outlook due to the country’s heavy reliance on energy imports.

MUFG analysts believe that rising global yields and higher Oil prices continue to undermine the Japanese Yen and reduce the effectiveness of previous interventions by the Ministry of Finance (MoF). The bank also noted that Japanese real yields remain too low to provide lasting support for the currency.

Commerzbank, meanwhile, argues that foreign exchange interventions alone will not be sufficient to support the JPY without additional rate hikes from the Bank of Japan (BoJ). The bank recalled that the relative success of the July 2024 interventions coincided with monetary tightening from the Japanese central bank.

Despite USD/JPY extending its advance above the 158.00 level, speculation about a potential intervention from Japanese authorities continues to cap further upside in the pair.

Japanese Yen Price Today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.36%0.39%0.10%0.26%0.97%1.15%0.37%
EUR-0.36%0.00%-0.26%-0.12%0.61%0.82%0.00%
GBP-0.39%-0.01%-0.28%-0.12%0.60%0.78%-0.00%
JPY-0.10%0.26%0.28%0.15%0.85%1.05%0.26%
CAD-0.26%0.12%0.12%-0.15%0.69%0.87%0.11%
AUD-0.97%-0.61%-0.60%-0.85%-0.69%0.20%-0.60%
NZD-1.15%-0.82%-0.78%-1.05%-0.87%-0.20%-0.79%
CHF-0.37%-0.01%0.00%-0.26%-0.11%0.60%0.79%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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