According to FXStreet, on January 13, the Japanese Yen (JPY) continued to increase against the US Dollar for three consecutive days, escaping its lowest level in recent months. Concerns about the geopolitical situation and expectations that the US Federal Reserve (Fed) will not cut interest rates further this month have caused investors to reduce risky investments and switch to safe assets such as the Japanese Yen.
In addition, rising inflationary pressures in Japan may prompt the Bank of Japan (BoJ) to consider raising interest rates in January or March this year. However, some experts predict that the BoJ will wait until April to ensure that the current strong wage growth trend will persist during the spring negotiations. This limits the potential for a large appreciation of the yen in the short term.
In addition, the widening yield gap between US and Japanese bonds, combined with the strength of the US dollar, has also reduced the attractiveness of the yen. This has made investors more cautious before expecting the yen to appreciate further. Many are waiting for new US inflation data, expected to be released this week, to make their next investment decisions.
Risk-off sentiment is the main factor driving demand for the Japanese yen. Global geopolitical tensions continue to escalate, with new US and UK sanctions targeting Russia’s oil sector and Russia stepping up its military offensive in Ukraine. Meanwhile, tensions in the Middle East remain high as Israeli airstrikes continue in Lebanon and Gaza. These factors are causing investors to seek safe haven assets, including the Japanese yen.
In the US, the recent positive jobs report has reinforced expectations that the Fed will pause its rate-cutting cycle. The lower unemployment rate and higher-than-expected job growth have sent the US dollar soaring and US bond yields hitting their highest levels in more than a year. This has reduced the attractiveness of the yen, which has a lower yield than the US dollar.
On the Japanese side, expectations that the BoJ will raise interest rates this year are supporting the value of the yen. However, the possibility that the BoJ will wait until April to further assess wage and inflation trends could slow the yen's appreciation in the short term.
The market is now focusing on the US inflation reports, including the Producer Price Index (PPI) and Consumer Price Index (CPI), which will be released this week. These will be important factors in determining the movement of the USD/JPY pair in the coming time.
According to Lao Dong, updated at 12:00 on January 13, the USD/JPY exchange rate is currently fluctuating around 157.466 USD/JPY, meaning 1 USD can be exchanged for about 157 JPY.
