The Japanese Yen (JPY) continued to attract buyers for the second consecutive day, moving closer to a multi-week high against the US Dollar (USD) in morning trading on January 30. The main reason was growing expectations that the Bank of Japan (BoJ) will continue to raise interest rates. In addition, the yield spread between the US and Japan is narrowing, causing many investors to switch to the Yen - a lower-yielding currency.
However, investors remain concerned that former US President Donald Trump's trade policies could lead to a global trade war, which could make traders more cautious about investing in the yen.
Meanwhile, the US Federal Reserve’s decision to keep interest rates unchanged on Wednesday but still maintain its hawkish stance is providing a boost to the dollar. Traders are now awaiting a meeting of the European Central Bank (ECB), which could cause market volatility and boost demand for the safe-haven yen.
Minutes of the Bank of Japan's December meeting released on Wednesday showed members discussed raising interest rates based on current economic conditions.
Broad-based wage gains, steady price increases and a solid economy could help the BoJ continue to gradually raise interest rates, former BoJ board member Makoto Sakurai said on Tuesday.
Meanwhile, the US Federal Reserve (Fed) decided to keep interest rates unchanged after a two-day meeting, while affirming that there are no plans to cut interest rates in the near future. Fed Chairman Jerome Powell said the central bank is in no rush to change policy and that current interest rates are still appropriate to the economic situation.
Powell's comments reinforced the belief that US interest rates will remain high for longer than expected, especially amid concerns that Mr Trump's protectionist trade policies could push up inflation and support the US dollar.
The yield on the 10-year US government bond has yet to rebound sharply after recovering from its lowest level in more than a month, due to uncertainty about the Trump administration's trade policy.
According to Japan's Asahi newspaper, a meeting between Japanese Prime Minister Shigeru Ishiba and former US President Donald Trump in Washington is scheduled to take place on February 7.
In addition, the European Central Bank (ECB) policy decision later today could cause strong volatility in financial markets. In addition, the US preliminary GDP report for the fourth quarter will also be an important factor affecting the USD/JPY pair.
According to Lao Dong's records at 12:00 on January 30, 2025, the Yen increased to 154.589 USD/JPY, meaning 1 USD can be exchanged for about 154 JPY.
