Yen appreciates, explodes at the beginning of the new year

    Huyền Mai |

    The Yen increased sharply thanks to expectations of a BoJ interest rate hike, causing USD/JPY to fall to 156.00 as Tokyo inflation data strengthened market confidence.

    According to FXStreet, on January 2, the USD/JPY pair continued to decrease for three consecutive sessions, trading around 156.20 USD/JPY. This decrease reflects the strengthening of the Japanese Yen (JPY), as the market predicts the Bank of Japan (BoJ) will raise interest rates in January.

    The main driver for the Yen's appreciation comes from strong inflation data from Tokyo. The consumer price index (CPI) in December increased to 3.0% over the same period last year, higher than the 2.6% in November. Other CPI also showed an upward trend, creating a basis for the BoJ to end its loose monetary policy and move to tightening, which often increases the value of the domestic currency.

    At the same time, the USD is weakening as US Treasury yields fall, making the USD less attractive than the JPY. The yield on the two-year and 10-year US Treasures fell to 4.24% and 4.53%, respectively. The USD Index (DXY), which measures the value of the USD against six major currencies, also edged down to around 108.00.

    Market sentiment is currently supporting the Yen as a safe asset amid uncertainty over global monetary policy. The Yen is traditionally considered a safe haven, and with expectations that the BoJ will raise interest rates, investors have more reason to switch to holding the Yen.

    The JPY's rally was also supported by the narrowing yield gap between Japanese and US bonds. For many years, higher US bond yields have weakened the Yen. But now, as the BoJ is expected to raise interest rates and other central banks such as the Fed may maintain a cautious stance, this gap is narrowing, creating conditions for the Yen to appreciate.

    In general, the recovery of the JPY has put strong downward pressure on USD/JPY. If the BoJ does indeed raise interest rates in the coming time, the Yen could continue to appreciate, keeping the USD/JPY down in the medium and long term.

    According to Lao Dong, updated at 3:00 p.m. on January 2, the USD/JPY exchange rate is currently fluctuating around 156.526 USD/JPY, meaning 1 USD can be exchanged for about 156.5 JPY.

    Update the latest Yen exchange rate HERE.

    Huyền Mai
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