According to FXStreet, on November 27, the Japanese Yen (JPY) increased in value as President-elect Donald Trump’s tariff announcements increased demand for safe-haven assets. In addition, the expectation that US Treasury Secretary nominee Scott Bessent would curb the budget deficit caused US bond yields to fall, giving the Yen an advantage.
Many investors fear that Mr. Trump’s tariffs could spark a trade war that would hurt the global economy, causing safe-haven flows to continue into the Japanese yen.
Scott Bessent's nomination as US Treasury Secretary has eased concerns among US bond investors, pushing 10-year bond yields to a two-week low.
New data from Japan on Tuesday showed service sector inflation picked up, raising the possibility that the Bank of Japan could raise interest rates again in December.
Japanese Prime Minister Shigeru Ishiba said he would ask businesses to raise wages significantly next spring.
Meanwhile, the US Dollar (USD) hovered near a weekly low, dragging the USD/JPY pair down to 152.25 - its lowest in nearly three weeks.
However, the yen's gains may be limited as investors worry that domestic political instability will prevent the Bank of Japan (BoJ) from raising interest rates further.
In addition, the ceasefire between Israel and Hezbollah has somewhat eased tensions in the Middle East, which, along with positive market sentiment, could reduce the attractiveness of the yen. Investors are also waiting for important US economic data, such as third-quarter GDP and PCE inflation, before making a decision.
Meanwhile, the minutes of the US Federal Reserve meeting showed that the Fed could keep interest rates high if inflation does not decline. However, the Fed is confident that inflation is falling and the labor market remains strong, allowing them to cut interest rates gradually.
Traders are now pricing in a 63% chance that the Fed will cut rates by 0.25% in December.
Investors now focus on US third-quarter GDP data and PCE index for further clarity, while Japanese markets await Tokyo's core CPI report on Friday.
