Yen exchange rate today
According to Lao Dong, on August 18, the Japanese Yen (JPY) continued to weaken against the USD, as safe-haven demand decreased and investors were skeptical about the timing of the Bank of Japan (BoJ) raising interest rates.
Market risk sentiment has improved thanks to expectations of peace in Ukraine, after a meeting between US President Donald Trump and Russian President Vladimir Putin in Alaska.
Although not yet a breakthrough, this dialogue is considered a positive step, helping to reduce geopolitical concerns and promote cash flow away from safe-haven assets such as the Yen. Mr. Trump also said that Ukrainian President Volodymyr Zelenskiy "can end the war immediately if he wants to", ahead of a bilateral meeting between the two leaders.
Yen continues to be pressured by USD as the market awaits signals from the Fed and BoJ
According to FXStreet, domestic political developments also affected the JPY. The ruling Liberal Democratic Party has just lost a seat in the Senate election, raising concerns that the process of normalizing monetary policy may slow down.
However, the Japanese economy still showed stability as GDP growth in the second quarter exceeded expectations, despite pressure from US tariffs. Along with the BoJ raising its inflation forecast, analysts believe that the possibility of raising interest rates before the end of the year is still open.
On the other hand, the US dollar was supported as expectations of a strong interest rate cut by the US Federal Reserve (Fed) in September eased. The market currently rates an 85% chance of the Fed cutting interest rates at the next meeting, but the level may not be as strong as before.
In addition, US economic data also gave mixed signals: retail sales in July increased as expected, but consumer confidence unexpectedly decreased. Notably, short-term and long-term inflation expectations have increased, along with higher-than-expected producer price data, showing that price pressure still exists. This makes the Fed more cautious about easing policy.
As a result, the USD/JPY pair maintained a slight increase, but lacked strong cash flow from buyers. Investors are reserved, waiting for more important signals from the FOMC meeting minutes released in midweek and Fed Chairman Jerome Powell's speech at the Jackson Hole conference.
