Japanese Yen touches fresh weekly top against USD after hawkish BoJ Minutes
- The Japanese Yen scales higher against a weaker USD for the third straight day on Wednesday.
- The hawkish BoJ Minutes, along with geopolitical uncertainties, underpin the safe-haven JPY.
- Rising Fed rate cut bets weigh on the USD and exert additional pressure on the USD/JPY pair.
The Japanese Yen (JPY) edges higher during the Asian session on Wednesday following the release of the Bank of Japan (BoJ) October meeting Minutes, which indicated that policymakers debated the need to continue raising interest rates. The BoJ's hawkish outlook marks a significant divergence in comparison to bets for further policy easing by the US Federal Reserve (Fed). The latter keeps the US Dollar (USD) depressed near its lowest level since early October and further benefits the lower-yielding JPY.
Moreover, persistent geopolitical uncertainties stemming from rising US-Venezuela tensions, the protracted Russia-Ukraine war, and the risk of a fresh Israel-Iran conflict contribute to safe-haven JPY's outperformance. This contributes to the USD/JPY pair's offered tone for the third consecutive day and backs the case for a further near-term depreciating move. However, a generally positive tone around the equity markets might keep a lid on the JPY amid the year-end thin liquidity and warrants caution for bulls.
Japanese Yen bulls retain near-term control amid BoJ’s hawkish outlook and safe-haven flows
- Minutes of the Bank of Japan's October meeting, released earlier this Wednesday, showed that board members agreed that the central bank will continue raising interest rates if economic price forecasts materialize. At the subsequent meeting in December, the central bank raised the policy rate to 0.75%, or a 30 year high, and left the door open to further tightening.
- Moreover, tensions linked to the United States' actions against vessels carrying Venezuelan oil, along with Russia's escalation of attacks on Ukraine and a potential new Israel-Iran war, underpin the safe-haven Japanese Yen for the third consecutive day. Apart from this, the prevalent US Dollar selling bias drags the USD/JPY pair to a fresh weekly low on Wednesday.
- The USD Index (DXY), which tracks the Greenback against a basket of currencies, has declined to a fresh low since early October amid rising bets for two more rate cuts by the Federal Reserve in 2026. Moreover, US President Donald Trump declared that the candidate for the role of the Fed Chair must commit to lowering rates even when the economy is performing well.
- This overshadows Tuesday's upbeat US GDP growth figures, which showed that the economy expanded by 4.3% annualized pace during the July–September period. The reading was stronger than consensus estimates and the 3.8% rise recorded in the previous quarter, though it does little provide any respite to the USD bulls or help ease the prevalent selling bias.
- Separately, the US Census Bureau reported that Durable Goods Orders declined 2.2% in October, following the 0.7% increase recorded in the previous month and worse than the market expectation for a decrease of 1.5%. Furthermore, a sharp fall in consumer confidence in December suggested that households are becoming much more cautious about the future.
- Traders now look forward to Wednesday's release of the US Initial Weekly Jobless Claims, which might influence the USD and provide some impetus to the USD/JPY pair later during the North American session. The focus, however, will remain glued to Friday's release of the Tokyo CPI report, which could play a key role in driving the JPY demand in the near term.
USD/JPY seems vulnerable to decline further towards the 155.00 psychological mark
The USD/JPY pair has now reversed the post-BoJ strong move up back closer to the November swing high. Moreover, the weekly downtrend from the vicinity of the 158.00 mark constitutes the formation of a bearish double-top pattern and validates the negative outlook for spot prices.
Meanwhile, the Moving Average Convergence Divergence (MACD) line sits below the Signal line just under the zero mark, while a slightly deeper negative histogram hints at building bearish momentum. The RSI stands at 50 (neutral) after easing from recent highs, reinforcing a wait-and-see stance.
This, in turn, suggests that the USD/JPY pair's downfall could stall near the 155.00 psychological mark. This is followed by the 154.55-154.50 horizontal zone, which should act as the neckline support of the bearish pattern. A convincing break below will be seen as a key trigger for bearish traders and pave the way for deeper losses.
(The technical analysis of this story was written with the help of an AI tool)
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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