Yen exchange rate today
According to Lao Dong, on August 19, the Yen (JPY) tends to increase in price, thanks to the cautious market sentiment and the stronger policy outlook from the Bank of Japan (BoJ).
Meanwhile, the USD weakened slightly as investors adjusted their expectations about the interest rate policy of the US Federal Reserve (Fed).
At its July meeting, the BoJ raised its inflation forecast and left open the possibility of raising interest rates this year. This move shows that the Japanese monetary authority is becoming more determined after many years of maintaining a super-loose policy.
Recent data also reinforced that view as the Japanese economy grew more than expected in the second quarter, despite pressure from US tariffs.
Russia-Ukraine peace prospects may limit growth
According to FXStreet, the Fed is expected to start a rate cut cycle from September, with a chance of nearly 85% according to market valuations. Further, analysts also expect the Fed to cut interest rates twice in 2025. The contrast in policy between the BoJ and the Fed is giving the Yen an advantage and putting pressure on the USD, causing the USD/JPY pair to decrease slightly in the first session of the week.
However, external factors may limit the Yen's gains. US President Donald Trump said he is preparing for a direct meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky after a summit with European leaders. This information has raised hopes for a peace deal, thereby reducing demand for safe-haven assets such as the Yen.
In addition, the failure of the Liberal Democratic Party (LDP) in the Japanese Senate election in July and concerns about the impact of US trade policy also increased risks, which could make the BoJ consider raising interest rates more cautiously. This somewhat hinders investors' strong betting mentality on the Yen.
This week, financial markets will pay attention to a series of important data and events from the US, including housing data, minutes of the FOMC monetary policy meeting and the speech of Fed Chairman Jerome Powell at the Jackson Hole conference.
In addition, the global preliminary PMI data due out on Thursday will also contribute to causing volatility, which could have a significant impact on the USD/JPY pair in the short term.
