Yen recovers strongly thanks to expectations of BoJ raising interest rates

Huyền Mai | 25/02/2025 12:30

The Yen recovered thanks to expectations of a BoJ rate hike, while the USD recovered slightly due to the Fed's cautious policy of early interest rate cuts.

Yen recovers thanks to expectations of BoJ continuing to increase interest rates

According to FXStreet, on February 25, the Yen (JPY) regained its upward momentum after falling at the beginning of the session, pulling the USD/JPY pair below the psychological mark of 150.00. The reason is that the latest data on Japan's Producer-service Price Index (PPI) shows that rising wages are causing businesses to adjust selling prices to cover costs. Along with high consumer inflation, this strengthens confidence that the Bank of Japan (BoJ) will continue to raise interest rates, helping the Yen strengthen.

However, BoJ Governor Kazuo Ueda's recent statement was cautious. He said the central bank was ready to intervene by buying more government bonds if long-term interest rates rose too quickly. This has hampered Japanese bond yields and somewhat reduced the JPY's upward momentum.

However, in the long term, many investors still believe that the Yen will have an upward trend due to expectations of the BoJ continuing to raise interest rates. Some experts even predict that the yield on 10-year Japanese bonds could reach 1.5% in the next few weeks.

USD recovers but outlook is unclear

Meanwhile, the US economy is issuing worrying signals. The latest economic data shows that US consumer confidence has fallen to a 15-month low, while business operations have expanded at a slower pace. Concerns about former President Donald Trump's tariff plans also raised the risk of a decline in domestic demand.

However, the US Federal Reserve (Fed) is still cautious. Chicago branch Fed President Austan Goolsbee stressed that the central bank needs to monitor further the impact of Trump's policies before considering cutting interest rates. This has helped the USD recover from its lowest level since December 2024, supporting the increase of the USD/JPY pair for two consecutive days.

Investors are now awaiting key US economic data, including the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index. However, the focus will be on reporting the Personal Consumption Expenditures Price Index (PCE) on Friday, February 28, as this is the Fed's preferred inflation measure and could influence interest rate decisions in the coming time.