According to FXStreet, on December 16, the Japanese Yen (JPY) recovered slightly after hitting a three-week low against the US Dollar.
However, the possibility of a significant recovery is still very low. The main reason is that investors believe that the Bank of Japan (BoJ) will not raise interest rates this weekend - a factor that has weakened the Yen in recent days. Meanwhile, expectations that the US Federal Reserve (Fed) will maintain a less dovish stance continue to push US bond yields higher, putting pressure on the low-yielding Yen.
Although newly released economic figures from Japan such as Machinery Orders and Manufacturing PMI exceeded expectations, the Yen still did not receive much support. However, persistent geopolitical risks and concerns about US President-elect Donald Trump's tariff policies could help the Yen maintain its role as a safe-haven asset. In addition, a slight decline in the US Dollar, due to the withdrawal of US bond yields, also limited the increase of the USD/JPY exchange rate.
Data from the Japanese government showed that in October, machinery orders increased by 2.1% compared to the previous month and increased by 5.6% compared to the same period last year. Japan's manufacturing PMI improved to 49.5 in December, but remained in contraction. In contrast, the services PMI rose to 51.4, bringing the composite PMI to 50.8 higher than last month and showing a slight improvement in the economy.
The BoJ's Tankan survey last week also showed that manufacturing confidence increased in the last quarter of the year. Expectations that inflation will remain above the 2% target, the economy will grow steadily and the salary increase is putting pressure on the BoJ to consider raising interest rates.
However, many investors are still skeptical about whether the BoJ really wants to tighten monetary policy, causing the Yen to continue to be under downward pressure.
Meanwhile, US 10-year bond yields hit a three-week high on Friday, on expectations that the Fed will act cautiously when cutting interest rates. According to CME Group's FedWatch tool, more than 93% of traders believe the Fed will cut interest rates by another 25 basis points on Wednesday. However, signs of slowing US inflation increase the likelihood of a slower pace of rate cuts in 2024.
This week, the market focus will be on the Fed and BoJ meetings - a factor that determines the short-term trend of the USD/JPY exchange rate.
According to Lao Dong, updated at 2:00 p.m. on December 16, the USD/JPY exchange rate is currently fluctuating around 153.652 USD/JPY, meaning 1 USD can be exchanged for about 153.5 JPY.
Update the latest Yen exchange rate HERE.
