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Japanese Yen struggles as higher Oil prices and a wide US-Japan rate gap weigh

  • USD/JPY holds near four-decade highs as the Japanese Yen remains under pressure.
  • Higher Oil prices and a wide US-Japan rate gap differential continue to weigh on the Yen.
  • Hawkish Fed expectations help the US Dollar regain momentum.

USD/JPY trades flat on Friday, holding near four-decade highs as the Japanese Yen struggles to attract buyers amid persistent headwinds, including higher Oil prices, Japan’s wide interest-rate gap with other major economies and a resilient US Dollar (USD).

The Yen found brief support after Japanese Prime Minister Sanae Takaichi echoed Finance Minister Satsuki Katayama's call to encourage greater investment in Japanese financial assets by households and pension funds.

Analysts at BBH noted that Japan is one of the world’s largest net creditors, with net foreign assets totaling roughly $3.6 trillion in the first quarter, equivalent to about 83% of Gross Domestic Product (GDP). As a result, even modest portfolio repatriation could generate meaningful demand for the Japanese Yen and Japanese government bonds (JGBs).

Meanwhile, attention stays on escalating tensions in the Middle East, which have pushed Oil prices higher and reignited inflation concerns. Rising energy costs also weigh on the Yen by increasing Japan's energy import bill.

Higher Oil prices keep hawkish Fed expectations intact, helping the US Dollar regain its footing after softer-than-expected US inflation data released earlier this week prompted traders to scale back bets on a near-term interest rate hike. According to the CME FedWatch Tool, markets currently price in around a 73% chance that the Fed will raise interest rates by December.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades flat around 100.75 after hitting a more than three-week low of 100.35 on Wednesday.

Cleveland Fed President Beth Hammack said on Friday, “Inflation is too high,” while noting that the labour market is around her estimate of maximum employment. Hammack added that the Fed’s nowcast shows core Personal Consumption Expenditures (PCE) inflation at 3.3% after incorporating this week’s data.

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 British Pound.

USDEURGBPJPYCADAUDNZDCHF
USD0.02%0.25%0.02%-0.17%0.21%0.01%-0.22%
EUR-0.02%0.23%-0.02%-0.23%0.19%-0.01%-0.25%
GBP-0.25%-0.23%-0.26%-0.45%-0.05%-0.21%-0.48%
JPY-0.02%0.02%0.26%-0.20%0.20%-0.02%-0.24%
CAD0.17%0.23%0.45%0.20%0.40%0.19%-0.05%
AUD-0.21%-0.19%0.05%-0.20%-0.40%-0.22%-0.45%
NZD-0.01%0.01%0.21%0.02%-0.19%0.22%-0.23%
CHF0.22%0.25%0.48%0.24%0.05%0.45%0.23%

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

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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