The Japanese Yen (JPY) continued to increase as the USD/JPY exchange rate fell below 150.00 in the trading session on March 5. Uncertainty surrounding the new tariffs applied by President Donald Trump to Canada and Mexico has worried investors, increasing demand for the Yen - a safe-haven asset.
In yesterday's session, USD/JPY hit its lowest level in nearly a year, down nearly 148.40. The USD weakened as more and more investors believe that the US Federal Reserve (Fed) will soon cut interest rates. The DXY index, which tracks the value of the US dollar against other major currencies, also fell to nearly 106.00 its lowest level in nearly three months.
Market sentiment is leaning towards the possibility that the Fed will start cutting interest rates from June, due to poor US economic data. According to the CME FedWatch tool, the probability of the Fed cutting interest rates in June has increased to 86%, compared to 71%, a week before.
Meanwhile, even though President Trump announced a 10% tariff on China and a 25% on Canada and Mexico, the USD still could not increase in value. The trade war escalates as China responds with tariffs targeting US agricultural products, putting financial markets under heavy pressure. The S&P 500 index fell more than 2% on Monday after Trump confirmed the new tariffs.
In Japan, the Yen continues to benefit as investors expect the Bank of Japan (BoJ) to raise interest rates this year. Data from the US Commodity Exchange (CSTC) shows speculators are pouring into the Yen: the number of contracts buying the currency has skyrocketed to 96,000 in the last week of February, compared to 61,000 in the previous week the highest level in more than 30 years, according to Reuters.
With this situation, the Japanese Yen may continue to increase, especially if the Fed really begins the interest rate cutting cycle in the coming time.
According to Lao Dong, at 3:00 p.m. on March 5, 2025, the Yen exchange rate is currently anchored around 149.455 JPY/USD, the Yen increased by about 0.3 percentage points.
