Over the past 10 days, the Yen has maintained a strong position against the USD, reaching a five-week high on November 27.
JPY weakened slightly today but still held at high levels.
According to FXStreet, the increase is largely due to expectations that the Bank of Japan (BoJ) may raise interest rates in December. Economic data, such as consumer price index and business services inflation, show that the Japanese economy is moving closer to its sustainable inflation target based on wage growth.
In addition, factors such as trade tensions and geopolitical risks also supported the yen, which is often considered a safe-haven asset. The Japanese government is pushing through a supplementary budget to support households affected by inflation, thereby helping to strengthen confidence in the yen.
However, the USD has recovered slightly in recent days thanks to rising US government bond yields and positive economic data. The US economy continues to grow steadily with GDP increasing by 2.8% in the third quarter, along with consumer spending reaching its highest level this year. At the same time, the labor market also showed solidity with the number of unemployment benefit applications falling slightly.
However, expectations that the Fed will cut interest rates again in December are limiting the USD's upside. The expansionary policies of newly elected US President Donald Trump are expected to boost inflation. These factors create a temporary equilibrium for the USD/JPY pair, but the Yen maintains a positive trend thanks to support from domestic factors in Japan.
Trading volumes may be low in the short term due to the Thanksgiving holiday in the US, but the market will continue to watch important data from Japan, including consumer inflation in Tokyo on Friday, to predict the next trend.
