|

USD/JPY climbs as US Dollar strengthens, Japan earthquake clouds BoJ outlook

  • USD/JPY moves higher as the US Dollar strengthens and US Treasury yields climb.
  • Markets expect a “hawkish cut” from the Federal Reserve on Wednesday, with a divided Committee.
  • The 7.6-magnitude earthquake in Japan heightens risk aversion and could complicate the BoJ’s normalization timeline.

USD/JPY trades around 155.80 on Monday at the time of writing, up 0.30% on the day, supported by a recovery in the US Dollar (USD) and rising US Treasury yields. Buying pressure on the US Dollar emerges as markets reposition ahead of Wednesday’s crucial Federal Reserve (Fed) decision, in a context of elevated volatility following a strong earthquake in Japan.

Investors remain convinced that the Fed will cut rates by 25 basis points this week, with chances around 86% according to the CME FedWatch tool. However, the communication from Chair Jerome Powell may take on a more restrictive tone to emphasize the risks of persistent inflation. Several analysts also highlight the possibility of an unusual number of dissenters within the Federal Open Market Committee (FOMC), according to Reuters, which would reduce visibility on the policy path heading into 2026.

With no major US data scheduled on Monday, attention turns to Tuesday’s ADP Employment Report and JOLTS Job Openings, which could refine the assessment of the labor-market slowdown, especially as November’s Nonfarm Payrolls (NFP) report will not be released until next week. Friday’s Personal Consumption Expenditures (PCE) data confirmed a slower-than-hoped disinflation trend, with Core PCE at 2.8% YoY, reinforcing the idea that the Fed may want to limit the pace of easing next year.

In Japan, tension escalated after a 7.6-magnitude earthquake struck the northeast of the country. According to Nikkei Asia, tsunami warnings were issued for Hokkaido, Aomori and Iwate. The event immediately weighed on Japanese assets, while the Japanese Yen (JPY) weakened as investors assessed the potential economic impact and the risk that the Bank of Japan (BoJ) may postpone its anticipated rate hike.

Recent macroeconomic data also raise concerns about Japan’s ability to absorb rapid monetary tightening. The third-quarter Gross Domestic Product (GDP) was revised down to an annualized contraction of 2.3%, the sharpest since 2023. However, nominal wages grew 2.6% in October, continuing to fuel expectations of a rate hike at the December BoJ meeting. Japanese Government Bond (JGB) yields remain near multi-year highs, reflecting this shifting policy narrative.

In summary, USD/JPY sits at the crossroads of two opposing forces. A US Dollar supported by rising US yields and a Japanese Yen weakened by post-earthquake uncertainty, despite prospects of policy tightening. The Fed decision on Wednesday, combined with the gradual assessment of the earthquake’s economic impact, will likely shape the pair’s next moves.

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 Swiss Franc.

USDEURGBPJPYCADAUDNZDCHF
USD0.04%0.07%0.30%0.11%0.16%-0.05%0.31%
EUR-0.04%0.02%0.24%0.06%0.12%-0.09%0.27%
GBP-0.07%-0.02%0.21%0.04%0.10%-0.11%0.24%
JPY-0.30%-0.24%-0.21%-0.17%-0.12%-0.32%0.02%
CAD-0.11%-0.06%-0.04%0.17%0.06%-0.16%0.20%
AUD-0.16%-0.12%-0.10%0.12%-0.06%-0.22%0.12%
NZD0.05%0.09%0.11%0.32%0.16%0.22%0.35%
CHF-0.31%-0.27%-0.24%-0.02%-0.20%-0.12%-0.35%

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.

More from Ghiles Guezout
Share:

Editor's Picks

AUD/USD keeps range near mid-0.7100s as USD bulls await US CPI

AUD/USD steadies near mid-0.7100s in the Asian session on Friday, stalling the previous day's sharp decline to an over one-week low. The August PPI report reaffirmed Fed rate-hike bets and boosted the US Dollar on Thursday, which weighed heavily on the pair. However, hawkish RBA expectations limited losses for the Aussie as USD bulls now await the release of the US consumer inflation figures before placing fresh bets.

USD/JPY holds lower ground toward 154.00; looks to US CPI

USD/JPY holds lower ground toward 154.00 in the Asian session on Friday after hot Japanese PPI data bolster a more hawkish BoJ repricing and provide fresh impetus to the Japanese Yen. However, the downside appears capped as the US Dollar preserves overnight gains ahead of the latest US consumer inflation data.

Gold: Gains remain capped by $4,400

Gold regains composure and trades with decent gains on Friday, managing to refocus attention on the $4,440 mark per ounce troy. Therefore, the precious metal reverses Thursday’s decline as the US Dollar alternates gains with losses at the end of the week.

Ripple Price Forecast: XRP extends decline as returning ETF inflows fail to lift outlook
Ripple (XRP) falls below $1.33 on Friday, marking the third consecutive day of declines. The token continues to track the broader cryptocurrency market downturn, with investors closely monitoring heightened macroeconomic uncertainty ahead of the United States (US) Consumer Price Index (CPI) release and next week’s Federal Reserve (Fed) monetary policy decision.
Weekly focus – The hawks set the tone
Risky assets came under pressure this week as energy prices kept creeping higher and the ECB surprised the markets with a hawkish tone. The price of Brent crude touched USD 110 per barrel on Thursday night, highest since mid-May, as news emerged that the Yemeni Houthis had reached control of key port cities and islands near the Bab el-Mandeb strait.
Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight
The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.