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USD/JPY extends gains as Fed repricing and rising Oil prices pressure the Yen

  • Japanese Yen remains under pressure as USD/JPY revisits intervention-watch levels near 159-160.
  • Rising Oil prices and Middle East tensions weigh on Japan’s energy-dependent economy.
  • Markets scale back Fed rate-cut bets, boosting Treasury yields and the US Dollar.

The Japanese Yen (JPY) trades under pressure against the US Dollar (USD) on Thursday, with USD/JPY returning to levels that previously triggered official “rate checks” by authorities on January 23, reviving concerns about potential currency intervention.

At the time of writing, the pair is trading around 159.18, extending gains for the third consecutive day.

The Yen’s sustained weakness reflects a combination of structural and near-term factors. A wide interest-rate differential between Japan and other major economies continues to weigh on the currency. At the same time, investors remain cautious about Japan’s Prime Minister Sanae Takaichi’s pro-stimulus fiscal stance, which could add to the country’s already elevated public debt and further undermine the Yen.

More recently, renewed demand for the US Dollar amid the ongoing US-Iran conflict has added to the pressure. The escalating tensions have rattled energy markets as Oil flows through the Strait of Hormuz have been severely disrupted, a key shipping route for global crude exports.

The situation is particularly challenging for Japan, a major net importer of energy, with a large share of its Oil supply sourced from the Middle East. Higher energy prices could weigh on Japan’s economic growth and trade balance, adding further pressure on the Yen.

Meanwhile, the Bank of Japan’s (BoJ) gradual pace of policy normalization is another key driver of the Yen’s underperformance. While other major central banks maintain relatively higher interest rates, the BoJ continues to tighten policy cautiously.

BoJ Governor Kazuo Ueda said on Thursday that the central bank will conduct appropriate monetary policy while carefully assessing the impact of foreign-exchange moves on its forecasts.

Rising Oil prices are fueling inflation concerns, keeping expectations alive that the BoJ may continue tightening policy. However, the timing and pace remain uncertain, with markets currently expecting a rate hike in April, though persistent Middle East tensions could cloud the monetary policy outlook.

As global inflation fears mount, traders have also sharply trimmed expectations for Federal Reserve (Fed) rate cuts. Markets are now pricing in less than 25 basis points of easing by year-end, down from more than 50 basis points before the Middle East conflict erupted. The shift toward a more hawkish Fed outlook has lifted US Treasury yields, lending additional support to the US Dollar.

Looking ahead, attention now turns to a heavy slate of US economic data due on Friday, including the Personal Consumption Expenditures (PCE) Price Index, the preliminary Q4 Gross Domestic Product (GDP) annualized reading, Durable Goods Orders, and the University of Michigan Consumer Sentiment and Expectations Index.

US Dollar Price Today

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

USDEURGBPJPYCADAUDNZDCHF
USD0.38%0.48%0.16%0.22%0.86%0.88%0.49%
EUR-0.38%0.10%-0.24%-0.15%0.49%0.50%0.10%
GBP-0.48%-0.10%-0.34%-0.25%0.38%0.40%0.00%
JPY-0.16%0.24%0.34%0.08%0.71%0.71%0.31%
CAD-0.22%0.15%0.25%-0.08%0.64%0.65%0.24%
AUD-0.86%-0.49%-0.38%-0.71%-0.64%0.01%-0.38%
NZD-0.88%-0.50%-0.40%-0.71%-0.65%-0.01%-0.41%
CHF-0.49%-0.10%-0.00%-0.31%-0.24%0.38%0.41%

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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (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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