USD/JPY ambitions for fresh all-time high near 162.00 amid firm US Dollar
- USD/JPY trades firmly near 161.85 as hawkish Fed bets strengthen the US Dollar.
- The Fed is expected to deliver at least one interest rate hike this year.
- Investors expect the BoJ to raise policy rates again this year.
The USD/JPY pair trades close to its fresh all-time high near 162.00 during the European trading session on Thursday. The pair advances as the US Dollar (USD) continues to outperform its peers due to firm speculation that the Federal Reserve (Fed) will tighten its monetary conditions this year.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades slightly higher at around 101.56, closer to its over-a-year high of 101.80 posted on Wednesday.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.03% | 0.14% | 0.32% | 0.51% | 1.71% | 1.72% | 0.62% | |
| EUR | -1.03% | -0.88% | -0.64% | -0.46% | 0.73% | 0.65% | -0.40% | |
| GBP | -0.14% | 0.88% | -0.02% | 0.37% | 1.55% | 1.54% | 0.45% | |
| JPY | -0.32% | 0.64% | 0.02% | 0.14% | 1.37% | 1.37% | 0.23% | |
| CAD | -0.51% | 0.46% | -0.37% | -0.14% | 1.21% | 1.23% | 0.07% | |
| AUD | -1.71% | -0.73% | -1.55% | -1.37% | -1.21% | -0.01% | -1.08% | |
| NZD | -1.72% | -0.65% | -1.54% | -1.37% | -1.23% | 0.01% | -1.07% | |
| CHF | -0.62% | 0.40% | -0.45% | -0.23% | -0.07% | 1.08% | 1.07% |
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).
According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 82%. While the possibility of at least two interest rate hikes is 42.2%. This is a sharp turnaround from two interest rate cuts projected before the onset of the Middle East war, which led to a significant increase in inflationary pressures.
On the Tokyo front, the Japanese Yen (JPY) underperforms against the US Dollar despite firm expectations that the Bank of Japan (BoJ) will raise interest rates further this year. In the monetary policy announcement this month, the BoJ raised interest rates by 25 basis points (bps) to 1%, and the Summary of Opinions (SoP) of the same meeting, released on Wednesday, showed that one policymaker said Japan's policy rate must be brought “closer to the estimated neutral rate of around 2% as soon as possible”.
Only one board member, Toichiro Asada, the appointee of Prime Minister (PM) Sanae Takaichi, voted against the hike, citing downside inflation and employment risks due to the Middle East crisis.
According to a Reuters report, the BoJ is highly anticipated to raise interest rates again in the December policy meeting.
Meanwhile, investors await the United States (US) Personal Consumption Expenditure Price Index (PCE) data for May, which will be published at 12:30 GMT. Investors will closely monitor the data to get fresh cues regarding the US interest rate outlook.
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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