Yen fluctuates strongly, waiting for signal from BoJ

Yen awaits signal from BoJ

The Yen was little changed against the US Dollar (USD) on December 10, as the market awaited an important policy decision from the BoJ. According to predictions, the BoJ may raise interest rates at its mid-December meeting, as data showed that inflation in Japan is still above the 2% target.

BoJ Governor Kazuo Ueda has recently hinted that the next rate hike is near. However, other officials, such as Toyoaki Nakamura, have stressed caution in adjusting policy, raising doubts about whether the BoJ will take drastic action as early as December.

USD under pressure from rate cut expectations

Meanwhile, the US dollar is under great pressure as the market expects the Fed to cut interest rates to support the economy. The US employment report (NFP) released over the weekend showed that the labor market is cooling, increasing the possibility that the Fed will take softer steps in monetary policy.

The yield on the 10-year US Treasury note rose slightly on Monday but remained low compared to previous months. This helped the USD recover slightly, but not enough to push USD/JPY to new highs.

Market sentiment and global uncertainty support the Yen

In addition to signals from the BoJ and the Fed, the Yen is benefiting from cautious investor sentiment. Factors such as persistent geopolitical tensions, the risk of a trade war, and instability in the Middle East are boosting demand for safe-haven assets such as the JPY.

In addition, investors are waiting for the US inflation report (CPI) on December 11, which is expected to be an important basis for the Fed to adjust its policy at the upcoming meeting. This data will also greatly affect the development of the USD/JPY exchange rate pair.

USD/JPY Outlook

In the short term, the yen could maintain its appeal, especially if the BoJ continues to signal a more hawkish stance on monetary policy. Conversely, if the Fed signals a cautious approach to rate cuts, the dollar could rally, easing the upward pressure on the yen.

Overall, markets are heading into a volatile trading week, with major events such as the US CPI report and the BoJ policy meeting next week.

The Japanese Yen is holding its ground thanks to expectations of a BoJ rate hike and a backdrop of global uncertainty. However, factors from the Fed's policy and US economic data will continue to influence the USD/JPY exchange rate in the coming time. Investors need to closely monitor signals from these two major central banks to make appropriate decisions.