USD/JPY gains traction above 153.00 as Bessent reaffirms strong US Dollar policy, Fed hold rates
- USD/JPY gains ground to around 153.35 in Thursday’s early Asian session.
- Bessent reaffirmed the United States' preference for a strong US Dollar.
- The Fed held its key interest steady in a range between 3.5% and 3.75% on Wednesday.
The USD/JPY pair recovers some lost ground to near 153.35 during the early Asian session on Thursday. The US Dollar (USD) strengthens against the Japanese Yen (JPY) after US Treasury Secretary Scott Bessent affirms a strong USD policy. The US weekly Initial Jobless Claims report is due later on Thursday.
Bessent said on Wednesday that the US has a strong USD policy and that means setting the right fundamentals. He also denied that the US was intervening in currency markets to support the Japanese Yen.
"The retracement/rebound in the USD is pretty logical, really, given that Bessent pushed back about as hard as you can imagine on the idea that the Trump Administration are seeking to engineer a softer USD, as well as putting to bed the market chatter that the Treasury were also seeking to prop up the yen," said Michael Brown, market analyst at online broker Pepperstone in London.
As widely expected, the US Federal Reserve (Fed) kept interest rates steady at its January meeting on Wednesday, citing still-elevated inflation alongside solid economic growth. Fed Chair Jerome Powell said during the press conference that “job gains have remained low, and the unemployment rate has shown some signs of stabilization.”
Powell emphasized that the Fed is "well positioned" to assess incoming data on a meeting-by-meeting basis and is not on a preset course for future rate decisions. Markets expect the US central bank to wait until at least June before adjusting its benchmark rate again.
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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